FALSE
2024
Q1
0001013462
12/31
100
12
12
12
0
0
0001013462
2024-01-01
2024-03-31
0001013462
exch:XNGS
2024-01-01
2024-03-31
0001013462
2024-04-26
xbrli:shares
0001013462
2024-03-31
iso4217:USD
0001013462
2023-12-31
iso4217:USD
xbrli:shares
0001013462
us-gaap:LicenseMember
2024-01-01
2024-03-31
0001013462
us-gaap:LicenseMember
2023-01-01
2023-03-31
0001013462
us-gaap:ServiceMember
2024-01-01
2024-03-31
0001013462
us-gaap:ServiceMember
2023-01-01
2023-03-31
0001013462
2023-01-01
2023-03-31
0001013462
2022-12-31
0001013462
2023-03-31
0001013462
us-gaap:CommonStockMember
2023-12-31
0001013462
us-gaap:AdditionalPaidInCapitalMember
2023-12-31
0001013462
us-gaap:RetainedEarningsMember
2023-12-31
0001013462
us-gaap:TreasuryStockCommonMember
2023-12-31
0001013462
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2023-12-31
0001013462
us-gaap:AdditionalPaidInCapitalMember
2024-01-01
2024-03-31
0001013462
us-gaap:TreasuryStockCommonMember
2024-01-01
2024-03-31
0001013462
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2024-01-01
2024-03-31
0001013462
us-gaap:RetainedEarningsMember
2024-01-01
2024-03-31
0001013462
us-gaap:CommonStockMember
2024-03-31
0001013462
us-gaap:AdditionalPaidInCapitalMember
2024-03-31
0001013462
us-gaap:RetainedEarningsMember
2024-03-31
0001013462
us-gaap:TreasuryStockCommonMember
2024-03-31
0001013462
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2024-03-31
0001013462
us-gaap:CommonStockMember
2022-12-31
0001013462
us-gaap:AdditionalPaidInCapitalMember
2022-12-31
0001013462
us-gaap:RetainedEarningsMember
2022-12-31
0001013462
us-gaap:TreasuryStockCommonMember
2022-12-31
0001013462
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2022-12-31
0001013462
us-gaap:TreasuryStockCommonMember
2023-01-01
2023-03-31
0001013462
us-gaap:AdditionalPaidInCapitalMember
2023-01-01
2023-03-31
0001013462
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2023-01-01
2023-03-31
0001013462
us-gaap:RetainedEarningsMember
2023-01-01
2023-03-31
0001013462
us-gaap:CommonStockMember
2023-03-31
0001013462
us-gaap:AdditionalPaidInCapitalMember
2023-03-31
0001013462
us-gaap:RetainedEarningsMember
2023-03-31
0001013462
us-gaap:TreasuryStockCommonMember
2023-03-31
0001013462
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2023-03-31
anss:segment
0001013462
anss:MoneyMarketFundConcentrationRiskMember
anss:MoneyMarketFundBenchmarkMember
us-gaap:MoneyMarketFundsMember
2024-01-01
2024-03-31
xbrli:pure
0001013462
anss:LeaseLicenseRevenueMember
2024-01-01
2024-03-31
0001013462
anss:LeaseLicenseRevenueMember
2023-01-01
2023-03-31
0001013462
anss:PerpetualLicenseRevenueMember
2024-01-01
2024-03-31
0001013462
anss:PerpetualLicenseRevenueMember
2023-01-01
2023-03-31
0001013462
us-gaap:MaintenanceMember
2024-01-01
2024-03-31
0001013462
us-gaap:MaintenanceMember
2023-01-01
2023-03-31
0001013462
us-gaap:TechnologyServiceMember
2024-01-01
2024-03-31
0001013462
us-gaap:TechnologyServiceMember
2023-01-01
2023-03-31
0001013462
anss:SalesChannelConcentrationRiskMember
us-gaap:SalesRevenueNetMember
us-gaap:SalesChannelDirectlyToConsumerMember
2024-01-01
2024-03-31
0001013462
anss:SalesChannelConcentrationRiskMember
us-gaap:SalesRevenueNetMember
us-gaap:SalesChannelDirectlyToConsumerMember
2023-01-01
2023-03-31
0001013462
anss:SalesChannelConcentrationRiskMember
us-gaap:SalesRevenueNetMember
us-gaap:SalesChannelThroughIntermediaryMember
2024-01-01
2024-03-31
0001013462
anss:SalesChannelConcentrationRiskMember
us-gaap:SalesRevenueNetMember
us-gaap:SalesChannelThroughIntermediaryMember
2023-01-01
2023-03-31
0001013462
2024-04-01
2024-03-31
0001013462
2025-04-01
2024-03-31
0001013462
2026-04-01
2024-03-31
0001013462
2027-04-01
2024-03-31
0001013462
anss:DYNAmoreMember
2023-01-01
2023-12-31
0001013462
us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember
2023-01-01
2023-12-31
0001013462
us-gaap:ComputerSoftwareIntangibleAssetMember
2024-03-31
0001013462
us-gaap:ComputerSoftwareIntangibleAssetMember
2023-12-31
0001013462
us-gaap:CustomerRelatedIntangibleAssetsMember
2024-03-31
0001013462
us-gaap:CustomerRelatedIntangibleAssetsMember
2023-12-31
0001013462
us-gaap:TradeNamesMember
2024-03-31
0001013462
us-gaap:TradeNamesMember
2023-12-31
0001013462
us-gaap:TradeNamesMember
2024-03-31
0001013462
us-gaap:TradeNamesMember
2023-12-31
0001013462
srt:MinimumMember
2024-03-31
0001013462
srt:MaximumMember
2024-03-31
0001013462
us-gaap:MoneyMarketFundsMember
2024-03-31
0001013462
us-gaap:CashEquivalentsMember
2024-03-31
0001013462
us-gaap:CorporateDebtSecuritiesMember
2024-03-31
0001013462
us-gaap:FairValueInputsLevel2Member
us-gaap:CorporateDebtSecuritiesMember
2024-03-31
0001013462
us-gaap:MunicipalBondsMember
2024-03-31
0001013462
us-gaap:FairValueInputsLevel2Member
us-gaap:MunicipalBondsMember
2024-03-31
0001013462
anss:OtherShortTermInvestmentsMember
2024-03-31
0001013462
us-gaap:FairValueInputsLevel2Member
anss:OtherShortTermInvestmentsMember
2024-03-31
0001013462
us-gaap:ShortTermInvestmentsMember
2024-03-31
0001013462
anss:CashEquivalentsAndShortTermInvestmentsMember
2024-03-31
0001013462
us-gaap:AvailableforsaleSecuritiesMember
2024-03-31
0001013462
us-gaap:FairValueInputsLevel1Member
2024-03-31
0001013462
us-gaap:FairValueInputsLevel2Member
2024-03-31
0001013462
us-gaap:FairValueInputsLevel3Member
2024-03-31
0001013462
us-gaap:CorporateDebtSecuritiesMember
us-gaap:FairValueInputsLevel1Member
2024-03-31
0001013462
us-gaap:CorporateDebtSecuritiesMember
us-gaap:FairValueInputsLevel3Member
2024-03-31
0001013462
us-gaap:FairValueInputsLevel1Member
us-gaap:MunicipalBondsMember
2024-03-31
0001013462
us-gaap:MunicipalBondsMember
us-gaap:FairValueInputsLevel3Member
2024-03-31
0001013462
us-gaap:FairValueInputsLevel1Member
anss:OtherShortTermInvestmentsMember
2024-03-31
0001013462
us-gaap:FairValueInputsLevel3Member
anss:OtherShortTermInvestmentsMember
2024-03-31
0001013462
us-gaap:FairValueInputsLevel1Member
2023-12-31
0001013462
us-gaap:FairValueInputsLevel2Member
2023-12-31
0001013462
us-gaap:FairValueInputsLevel3Member
2023-12-31
0001013462
anss:OtherShortTermInvestmentsMember
2023-12-31
0001013462
us-gaap:FairValueInputsLevel1Member
anss:OtherShortTermInvestmentsMember
2023-12-31
0001013462
us-gaap:FairValueInputsLevel2Member
anss:OtherShortTermInvestmentsMember
2023-12-31
0001013462
us-gaap:FairValueInputsLevel3Member
anss:OtherShortTermInvestmentsMember
2023-12-31
0001013462
anss:CanonsburgOfficeNewCompanyHeadquartersMember
2024-03-31
utr:sqft
0001013462
us-gaap:RevolvingCreditFacilityMember
2024-03-31
0001013462
us-gaap:LetterOfCreditMember
2024-03-31
0001013462
us-gaap:BaseRateMember
2024-01-01
2024-03-31
0001013462
us-gaap:RevolvingCreditFacilityMember
2023-12-31
0001013462
us-gaap:ServiceMember
2024-01-01
2024-03-31
0001013462
us-gaap:ServiceMember
2023-01-01
2023-03-31
0001013462
us-gaap:GeneralAndAdministrativeExpenseMember
2024-01-01
2024-03-31
0001013462
us-gaap:GeneralAndAdministrativeExpenseMember
2023-01-01
2023-03-31
0001013462
us-gaap:ResearchAndDevelopmentExpenseMember
2024-01-01
2024-03-31
0001013462
us-gaap:ResearchAndDevelopmentExpenseMember
2023-01-01
2023-03-31
0001013462
country:US
2024-01-01
2024-03-31
0001013462
country:US
2023-01-01
2023-03-31
0001013462
country:CN
2024-01-01
2024-03-31
0001013462
country:CN
2023-01-01
2023-03-31
0001013462
country:JP
2024-01-01
2024-03-31
0001013462
country:JP
2023-01-01
2023-03-31
0001013462
country:DE
2024-01-01
2024-03-31
0001013462
country:DE
2023-01-01
2023-03-31
0001013462
country:KR
2024-01-01
2024-03-31
0001013462
country:KR
2023-01-01
2023-03-31
0001013462
us-gaap:EMEAMember
2024-01-01
2024-03-31
0001013462
us-gaap:EMEAMember
2023-01-01
2023-03-31
0001013462
anss:OtherInternationalMember
2024-01-01
2024-03-31
0001013462
anss:OtherInternationalMember
2023-01-01
2023-03-31
0001013462
country:US
2024-03-31
0001013462
country:US
2023-12-31
0001013462
country:FR
2024-03-31
0001013462
country:FR
2023-12-31
0001013462
country:IN
2024-03-31
0001013462
country:IN
2023-12-31
0001013462
us-gaap:EMEAMember
2024-03-31
0001013462
us-gaap:EMEAMember
2023-12-31
0001013462
anss:OtherInternationalMember
2024-03-31
0001013462
anss:OtherInternationalMember
2023-12-31
0001013462
anss:IndiaServiceTaxAuditMember
2024-03-31
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
March 31, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number:
0-20853
ANSYS, Inc.
(Exact name of registrant as specified in its charter)
Delaware 04-3219960
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
2600 ANSYS Drive, Canonsburg, PA 15317
(Address of Principal Executive Offices) (Zip Code)
844
-
462-6797
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.01 par value per share ANSS Nasdaq Stock Market LLC
(Nasdaq Global Select Market)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes
No
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T ((s)232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit such files).
Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of "large accelerated filer,"
"accelerated filer," "smaller reporting company," and "emerging growth
company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has
elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a)
of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act).
Yes
No
The number of shares of the Registrant's Common Stock, $0.01 par value per
share, outstanding as of April 26, 2024 wa
s
87,299,981
shares.
-------------------------------------------------------------------------------
ANSYS, INC. AND SUBSIDIARIES
INDEX
PART I FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - 3
March
3
1
, 202
4
and December 31, 20
23
Condensed Consolidated Statements of Income - Three 4
Months Ended
Mar
ch
3
1
, 202
4
and 202
3
Condensed Consolidated Statements of Comprehensive Income - Three 5
Months Ended
Ma
r
ch
3
1
, 202
4
and 202
3
Condensed Consolidated Statements of Cash Flows - 6
Three
Months Ended
Ma
r
ch
3
1
, 202
4
and 202
3
Condensed Consolidated Statements of Stockholders' Equity - Three 7
Months Ended
March
3
1
, 202
4
and 202
3
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of 19
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative 38
Disclosures About Market Risk
Item 4. Controls and Procedures 40
PART II OTHER INFORMATION
Item 1. Legal Proceedings 41
Item 1A. Risk Factors 41
Item 2. Unregistered Sales of Equity Securities 41
and
Use of Proceeds
Item 3. Defaults Upon Senior Securities 41
Item 4. Mine Safety Disclosures 41
Item 5. Other Information 41
Item 6. Exhibits 42
SIGNATURES 43
2
-------------------------------------------------------------------------------
Table of Contents
PART I - FINANCIAL INFORMATION
Item 1.
Financial Statements:
ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share and per share data) March 31, December 31,
2024 2023
ASSETS
Current assets:
Cash and cash equivalents $ 1,050,509 $ 860,201
Short-term investments 20,100 189
Accounts receivable, less allowance for doubtful accounts of $ 650,044 864,526
20,700
Other receivables and current assets 260,518 324,651
Total current assets 1,981,171 2,049,567
Long-term assets:
Property and equipment, net 80,930 77,780
Operating lease right-of-use assets 111,069 116,980
Goodwill 3,797,859 3,805,874
Other intangible assets, net 806,375 835,417
Other long-term assets 210,165 273,030
Deferred income taxes 162,845 164,227
Total long-term assets 5,169,243 5,273,308
Total assets $ 7,150,414 $ 7,322,875
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 27,899 $ 22,772
Accrued bonuses and commissions 41,901 170,909
Accrued income taxes 15,885 22,454
Other accrued expenses and liabilities 187,722 215,645
Deferred revenue 433,167 457,514
Total current liabilities 706,574 889,294
Long-term liabilities:
Deferred income taxes 73,092 75,301
Long-term operating lease liabilities 95,320 100,505
Long-term debt 753,970 753,891
Other long-term liabilities 111,815 113,520
Total long-term liabilities 1,034,197 1,043,217
Commitments and contingencies
Stockholders' equity:
Preferred stock, $ - -
0.01
par value;
2,000,000
shares authorized;
zero
shares issued or outstanding
Common stock, $ 953 953
0.01
par value;
300,000,000
shares authorized;
95,267,307
shares issued
Additional paid-in capital 1,641,813 1,670,450
Retained earnings 5,318,120 5,283,342
Treasury stock, at cost: ( (
7,971,231 1,438,948 1,474,110
and ) )
8,361,447
shares, respectively
Accumulated other comprehensive loss ( (
112,295 90,271
) )
Total stockholders' equity 5,409,643 5,390,364
Total liabilities and stockholders' equity $ 7,150,414 $ 7,322,875
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
-------------------------------------------------------------------------------
Table of Contents
ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
(in thousands, except per share data) March 31, March 31,
2024 2023
Revenue:
Software licenses $ 160,321 $ 219,152
Maintenance and service 306,284 290,295
Total revenue 466,605 509,447
Cost of sales:
Software licenses 10,044 11,744
Amortization 22,484 19,618
Maintenance and service 36,139 36,290
Total cost of sales 68,667 67,652
Gross profit 397,938 441,795
Operating expenses:
Selling, general and administrative 219,643 188,584
Research and development 128,811 120,335
Amortization 6,145 5,181
Total operating expenses 354,599 314,100
Operating income 43,339 127,695
Interest income 10,995 4,078
Interest expense ( (
12,369 10,758
) )
Other expense, net ( (
1,007 177
) )
Income before income tax provision 40,958 120,838
Income tax provision 6,180 20,216
Net income $ 34,778 $ 100,622
Earnings per share - basic:
Earnings per share $ 0.40 $ 1.16
Weighted average shares 87,067 86,930
Earnings per share - diluted:
Earnings per share $ 0.40 $ 1.15
Weighted average shares 87,780 87,431
The accompanying notes are an integral part of the condensed consolidated
financial statements.
4
-------------------------------------------------------------------------------
Table of Contents
ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended
(in thousands) March 31, March 31,
2024 2023
Net income $ 34,778 $ 100,622
Other comprehensive (loss) income:
Foreign currency translation adjustments ( 13,284
21,947
)
Net unrealized losses on available-for-sale securities, net of tax of $ ( -
0 77
)
Comprehensive income $ 12,754 $ 113,906
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
-------------------------------------------------------------------------------
Table of Contents
ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
(in thousands) March 31, March 31,
2024 2023
Cash flows from operating activities:
Net income $ 34,778 $ 100,622
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 35,536 32,124
Operating lease right-of-use assets expense 5,664 5,381
Deferred income tax benefit ( (
2,340 2,915
) )
Provision for bad debts 412 (
118
)
Stock-based compensation expense 58,664 44,171
Other 402 307
Changes in operating assets and liabilities:
Accounts receivable 264,474 185,385
Other receivables and current assets 60,593 68,991
Other long-term assets ( (
671 5,798
) )
Accounts payable, accrued expenses and current liabilities ( (
147,636 135,365
) )
Accrued income taxes ( 1,481
6,280
)
Deferred revenue ( (
17,714 25,879
) )
Other long-term liabilities ( (
3,065 7,621
) )
Net cash provided by operating activities 282,817 260,766
Cash flows from investing activities:
Acquisitions, net of cash acquired - (
120,584
)
Capital expenditures ( (
10,543 6,892
) )
Purchases of short-term investments ( (
19,940 56
) )
Other investing activities ( (
3,953 858
) )
Net cash used in investing activities ( (
34,436 128,390
) )
Cash flows from financing activities:
Purchase of treasury stock - (
196,494
)
Restricted stock withholding taxes paid in lieu of issued shares ( (
65,089 52,916
) )
Proceeds from shares issued for stock-based compensation 10,446 8,582
Net cash used in financing activities ( (
54,643 240,828
) )
Effect of exchange rate fluctuations on cash and cash equivalents ( 1,750
3,430
)
Net increase (decrease) in cash and cash equivalents 190,308 (
106,702
)
Cash and cash equivalents, beginning of period 860,201 614,391
Cash and cash equivalents, end of period $ 1,050,509 $ 507,689
Supplemental disclosure of cash flow information:
Income taxes paid $ 16,721 $ 7,650
Interest paid $ 11,939 $ 10,606
Non-cash consideration in connection with acquisitions $ 1,640 $ 5,056
The accompanying notes are an integral part of the condensed consolidated
financial statements.
6
-------------------------------------------------------------------------------
Table of Contents
ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
Common Stock Additional Retained Treasury S
Paid-In Earnings
Capital
(in thousands) Shares Amount Shares Amount
Balance, 95,267 $ 953 $ 1,670,450 $ 5,283,342 8,361 $ ( $ ( $ 5,390,364
January 1,474,110 90,271
1, 2024 ) )
Acquisition activity of 1,818 ( 719 2,537
previously acquired 8
businesses )
Stock-based ( ( 34,443 3,988
compensation activity 30,455 382
) )
Other comprehensive loss ( (
22,024 22,024
) )
Net income 34,778 34,778
Balance, 95,267 $ 953 $ 1,641,813 $ 5,318,120 7,971 $ ( $ ( $ 5
March 1,438,948 112,295
31, 2024 ) )
tock Accumulated Other Total
Comprehensive Loss Stockholders'
Equity
,409,643
Common Stock Additional Retained Trea
Paid-In Earnings
Capital
(in thousands) Shares Amount Shares Amount
Balance, 95,267 $ 953 $ 1,540,317 $ 4,782,930 8,317 $ ( $ ( $ 4,865
January 1,335,627 122,722
1, 2023 ) )
Treasury shares acquired, 650 ( (
including excise tax 197,416 197,416
) )
Stock-based compensation ( ( 34,350 (
activity 34,529 356 179
) ) )
Other comprehensive income 13,284 13,284
Net income 100,622 100,622
Balance, 95,267 $ 953 $ 1,505,788 $ 4,883,552 8,611 $ ( $ (
March 1,498,693 109,438
31, 2023 ) )
sury Stock Accumulated Total
Other Stockholders'
Comprehensive Equity
(Loss) Income
,851
$ 4,782,162
The accompanying notes are an integral part of the condensed consolidated
financial statements.
7
-------------------------------------------------------------------------------
Table of Contents
ANSYS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(Unaudited)
1.
Organization
ANSYS, Inc. (Ansys, we, us, our) develops and globally markets engineering
simulation software and services widely
used by engineers, designers, researchers and students across a broad spectrum
of industries and academia, including high-tech, aerospace and defense,
automotive, energy, industrial equipment, materials and chemicals, consumer
products, healthcare and construction.
As defined by the accounting guidance for segment reporting, we operate as
one
segment.
Given the integrated approach to the multi-discipline problem-solving needs of
our customers, a single sale may contain components from multiple product
areas and include combined technologies. We also have a multi-year product and
integration strategy that will result in new, combined products or changes to
the historical product offerings. As a result, it is impracticable for us to
provide accurate historical or current reporting among our various product
lines.
Pending Acquisition
On January 15, 2024, we entered into an Agreement and Plan of Merger (the
Merger Agreement) with Synopsys, Inc., a Delaware corporation (Synopsys), and
ALTA Acquisition Corp., a Delaware corporation and wholly owned subsidiary of
Synopsys (Merger Sub), under which Synopsys will acquire Ansys. The
transaction is anticipated to close in the first half of 2025, subject to
approval by Ansys stockholders, the receipt of required regulatory approvals
and other customary closing conditions.
2.
Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in
the United States for interim financial information for commercial and
industrial companies, the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, the accompanying unaudited condensed consolidated
financial statements do not include all of the information and footnotes
required by accounting principles generally accepted in the United States for
complete financial statements. The accompanying unaudited condensed
consolidated financial statements should be read in conjunction with our
audited consolidated financial statements (and notes thereto) included in our
Annual Report on Form 10-K for the year ended December 31, 2023 (2023 Form
10-K). The condensed consolidated December 31, 2023 balance sheet presented is
derived from the audited December 31, 2023 balance sheet included in the 2023
Form 10-K. In our opinion, all adjustments considered necessary for a fair
presentation of the financial statements have been included, and all
adjustments are of a normal and recurring nature. Operating results for the
three months ended March 31, 2024 are not necessarily indicative of the
results that may be expected for any future period.
Accounting Guidance Issued and Not Yet Adopted
Segment reporting:
In November 2023, the FASB issued ASU No. 2023-07,
Segment Reporting
(Topic 280):
Improvements to Reportable Segment Disclosures
(ASU 2023-07). ASU 2023-07 requires enhanced disclosures related to segment
information, including for entities with one reportable segment. It does not
change the determination of reportable segments. The enhanced disclosures in
accordance with the new guidance are required to be reported in the annual
period beginning after December 15, 2023. Early adoption is permitted. The
standard only impacts footnote disclosures.
Income tax disclosures:
In December 2023, the FASB issued ASU No. 2023-09,
Income Taxes
(Topic 740):
Improvements to Income Tax Disclosures
(ASU 2023-09). ASU 2023-09 requires disclosure of greater disaggregation of
information in the rate reconciliation and income taxes paid disaggregated by
jurisdiction. It also includes certain other amendments to improve the
effectiveness of income tax disclosures. The standard is effective for annual
periods beginning after December 15, 2024. Early adoption is permitted. The
standard only impacts footnote disclosures.
8
-------------------------------------------------------------------------------
Table of Contents
Cash, Cash Equivalents and Short-Term Investments
Cash and cash equivalents consist primarily of highly liquid investments such
as deposits held at major banks and money market funds. Cash equivalents are
carried at cost, which approximates fair value. Our money market fund balances
are held in various funds of a single issuer at March 31, 2024.
Short-term investments consist of available-for-sale debt securities with
remaining maturities greater than three months at the date of purchase and
time deposits. Investments in debt securities with remaining maturities
greater than three months at the date of purchase are designated as short-term
available-for-sale securities, as we may convert these investments into cash
at any time, including to fund general operations. We invest in debt
securities that have an effective maturity term of less than three years. The
debt securities are carried at fair value, with unrealized gains and losses
included in the condensed consolidated balance sheets as a component of
accumulated other comprehensive (loss) income. For available-for-sale debt
securities in an unrealized loss position, we evaluate whether a current
expected credit loss exists based on available information relevant to the
credit rating of the security, current economic conditions and reasonable and
supportable forecasts. The allowance for any credit loss will be recorded in
other expense, net, on the condensed consolidated statements of income, not to
exceed the amount of the unrealized loss. Any excess unrealized loss other
than the credit loss is generally recognized in accumulated other
comprehensive loss. The cost of securities sold is based on the specific
identification method and realized gains and losses are included in other
expense, net. To date, we have not recorded any credit loss or realized gains
or losses.
3.
Revenue from Contracts with Customers
Disaggregation of Revenue
The following table summarizes revenue:
Three Months Ended
(in thousands, except percentages) March 31, March 31,
2024 2023
Revenue:
Subscription lease licenses $ 94,800 $ 147,922
Perpetual licenses 65,521 71,230
Software licenses 160,321 219,152
Maintenance 289,340 268,593
Service 16,944 21,702
Maintenance and service 306,284 290,295
Total revenue $ 466,605 $ 509,447
Direct revenue, as a percentage of total revenue 66.5 % 76.3 %
Indirect revenue, as a percentage of total revenue 33.5 % 23.7 %
Our software license revenue is recognized up front, while maintenance and
service revenue is recognized over the term of the contract.
9
-------------------------------------------------------------------------------
Table of Contents
Deferred Revenue
Deferred revenue consists of billings made or payments received in advance of
revenue recognition from customer agreements. The timing of revenue
recognition may differ from the timing of billings to customers. Payment terms
vary by the type and location of customer and the products or services
offered. The time between invoicing and when payment is due is not significant.
The changes in deferred revenue, inclusive of both current and long-term
deferred revenue, during the three months ended March 31, 2024 and 2023 were
as follows:
(in thousands) 2024 2023
Beginning balance - January 1 $ 479,754 $ 435,758
Acquired deferred revenue - 6,555
Deferral of revenue 448,381 483,502
Recognition of revenue ( (
466,605 509,447
) )
Currency translation ( 701
6,929
)
Ending balance - March 31 $ 454,601 $ 417,069
Total revenue allocated to remaining performance obligations as of March 31,
2024 will be recognized as revenue as follows:
(in thousands)
Next 12 months $ 866,273
Months 13-24 333,293
Months 25-36 125,623
Thereafter 44,264
Total revenue allocated to remaining performance obligations $ 1,369,453
Revenue allocated to remaining performance obligations represents contracted
revenue that has not yet been recognized, which includes both deferred revenue
and backlog. Our backlog represents deferred revenue associated with
installment billings for periods beyond the current quarterly billing cycle
and committed contracts with start dates beyond the end of the current period.
Revenue recognized during the three months ended March 31, 2024 and 2023
included amounts in deferred revenue and backlog at the beginning of the
period of $
292.8
million and $
317.6
million, respectively.
4.
Acquisitions
During the three months ended March 31, 2024, we incurred acquisition-related
expenses of $
14.3
million, primarily consisting of costs related to the Merger Agreement with
Synopsys. Acquisition-related expenses are recognized as selling, general and
administrative and research and development expenses on the condensed
consolidated statements of income.
On December 5, 2023, we entered into an agreement to make a strategic equity
investment. The investment is subject to regulatory approvals and customary
closing conditions and is expected to close in 2024 for a purchase price of $
300.0
million.
2023 Acquisitions
On January 3, 2023, we completed the acquisition of DYNAmore for a purchase
price of $
140.8
million, or $
128.0
million net of cash acquired. The acquisition expanded our position as a
simulation solution provider within the automotive industry. The effects of
the acquisition were not material to our condensed consolidated results of
operations.
Additionally, during the year ended December 31, 2023, we completed other
acquisitions to expand our solution offerings and enhance our customers'
experience. These acquisitions were not significant, individually or in the
aggregate. The combined purchase price of these acquisitions during the year
ended December 31, 2023 was approximately $
94.4
million, or $
88.3
million net of cash acquired.
The operating results of each acquisition have been included in our condensed
consolidated financial statements since each respective date of acquisition.
The effects of the acquisitions were not material to our condensed
consolidated results of operations.
10
-------------------------------------------------------------------------------
Table of Contents
5.
Other Receivables and Current Assets and Other Accrued Expenses and Liabilities
Our other receivables and current assets and other accrued expenses and
liabilities comprise the following balances:
(in thousands) March 31, December 31,
2024 2023
Receivables related to unrecognized revenue $ 149,487 $ 253,646
Income taxes receivable, including overpayments and refunds 36,778 22,104
Prepaid expenses and other current assets 74,253 48,901
Total other receivables and current assets $ 260,518 $ 324,651
Accrued vacation 42,546 42,435
Payroll-related accruals 39,142 25,012
Accrued expenses and other current liabilities 106,034 148,198
Total other accrued expenses and liabilities $ 187,722 $ 215,645
Receivables related to unrecognized revenue represent the current portion of
billings made for customer contracts that have not yet been recognized as
revenue.
6.
Earnings Per Share
Basic earnings per share (EPS) amounts are computed by dividing earnings by
the weighted average number of common shares outstanding during the period.
Diluted EPS amounts assume the issuance of common stock for all potentially
dilutive equivalents outstanding. To the extent stock awards are anti-dilutive,
they are excluded from the calculation of diluted EPS.
The details of basic and diluted EPS are as follows:
Three Months Ended
(in thousands, except per share data) March 31, March 31,
2024 2023
Net income $ 34,778 $ 100,622
Weighted average shares outstanding - basic 87,067 86,930
Dilutive effect of stock plans 713 501
Weighted average shares outstanding - diluted 87,780 87,431
Basic earnings per share $ 0.40 $ 1.16
Diluted earnings per share $ 0.40 $ 1.15
Anti-dilutive shares 53 650
11
-------------------------------------------------------------------------------
Table of Contents
7.
Goodwill and Intangible Assets
Intangible assets are classified as follows:
March 31, 2024 December 31, 2023
(in thousands) Gross Accumulated Gross Accumulated
Carrying Amortization Carrying Amortization
Amount Amount
Finite-lived intangible assets:
Developed software and core technologies $ 1,147,238 $ ( $ 1,146,022 $ (
576,985 557,359
) )
Customer lists 286,269 ( 289,874 (
94,724 89,800
) )
Trade names 189,767 ( 190,203 (
145,547 143,880
) )
Total $ 1,623,274 $ ( $ 1,626,099 $ (
817,256 791,039
) )
Indefinite-lived intangible asset:
Trade name $ 357 $ 357
Finite-lived intangible assets are amortized over their estimated useful lives
of
two years
to
seventeen years
.
As of March 31, 2024, estimated future amortization expense for the intangible
assets reflected above was as follows:
(in thousands)
Remainder of 2024 $ 83,630
2025 115,308
2026 116,148
2027 119,371
2028 112,994
2029 99,177
Thereafter 159,390
Total intangible assets subject to amortization 806,018
Indefinite-lived trade name 357
Other intangible assets, net $ 806,375
The changes in goodwill during the three months ended March 31, 2024 and 2023
were as follows:
(in thousands) 2024 2023
Beginning balance - January 1 $ 3,805,874 $ 3,658,267
Acquisitions and adjustments 2,872 69,227
(1)
Currency translation ( 9,701
10,887
)
Ending balance - March 31 $ 3,797,859 $ 3,737,195
(1)
In accordance with the accounting for business combinations, we recorded
adjustments to goodwill for the effect of changes in the provisional fair
values of the assets acquired and liabilities assumed during the measurement
period (up to one year from the acquisition date) as we obtained new
information about facts and circumstances that existed as of the acquisition
date that, if known, would have effected the measurement of the amounts
recognized as of that date.
During the first quarter of 2024, we completed the annual impairment test for
goodwill and the indefinite-lived intangible asset and determined that these
assets had not been impaired as of the test date, January 1, 2024. No events
or circumstances changed during the three months ended March 31, 2024 that
would indicate that the fair values of our reporting unit and indefinite-lived
intangible asset are below their carrying amounts.
12
-------------------------------------------------------------------------------
Table of Contents
8.
Cash Equivalents and Short-Term Investments
During the three months ended March 31, 2024, we invested in available-for-sale
debt securities, which are included in short-term investments in the condensed
consolidated balance sheets.
As of March 31, 2024, our cash equivalents and short-term investments were as
follows:
(in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Less Estimated Fair Value
Than 12 Continuous Months (1)
Cash equivalents:
Money market $ 294,440 $ - $ - $ 294,440
funds
Total cash equivalents 294,440 - - 294,440
Short-term investments:
Corporate debt securities 15,046 1 ( 14,988
59
)
Municipal bonds 4,943 - ( 4,924
19
)
Other short-term 188 - - 188
investments
Total short-term 20,177 1 ( 20,100
investments 78
)
Total cash equivalents and $ 314,617 $ 1 $ ( $ 314,540
short-term investments 78
)
(1)
See Note 9, "Fair Value Measurements" for further discussion on fair values.
Of the $
15.0
million corporate debt securities, $
13.8
million are in a loss position at March 31, 2024. Of the $
4.9
million municipal bonds, $
4.5
million are in a loss position at March 31, 2024.
The unrealized losses presented above are primarily attributable to changes in
interest rates. We believe that we have the ability to realize the full value
of all of these investments upon maturity.
The following table outlines maturities of our available-for-sale debt
securities as of March 31, 2024:
(in thousands) Amortized Cost Fair Value
Less than 1 year $ 4,232 $ 4,226
1-3 years 15,757 15,686
Total $ 19,989 $ 19,912
13
-------------------------------------------------------------------------------
Table of Contents
9.
Fair Value Measurement
The valuation hierarchy for disclosure of assets and liabilities reported at
fair value prioritizes the inputs for such valuations into three broad levels:
.
Level 1: quoted prices (unadjusted) in active markets for identical assets or
liabilities;
.
Level 2: quoted prices for similar assets and liabilities in active markets or
inputs that are observable for the asset or liability, either directly or
indirectly through market corroboration, for substantially the full term of
the financial instrument; or
.
Level 3: unobservable inputs based on our own assumptions used to measure
assets and liabilities at fair value.
A financial asset's or liability's classification within the hierarchy is
determined based on the lowest level input that is significant to the fair
value measurement.
Our debt is classified within Level 2 of the fair value hierarchy because
these borrowings are not actively traded and have a variable interest rate
structure based upon market rates. The carrying amount of our debt
approximates the estimated fair value. See Note 11, "Debt", for additional
information on our borrowings.
The following tables provide the assets carried at fair value and measured on
a recurring basis:
Fair Value Measurements at Reporting Date Using:
(in thousands) March 31, Quoted Prices in Significant Other Significant
2024 Active Markets Observable Unobservable
(Level 1) Inputs Inputs
(Level 2) (Level 3)
Assets
Cash equivalents:
Money market funds $ 294,440 $ 294,440 $ - $ -
Short-term investments:
Corporate debt securities $ 14,988 $ - $ 14,988 $ -
Municipal bonds $ 4,924 $ - $ 4,924 $ -
Other short-term investments $ 188 $ - $ 188 $ -
Deferred compensation plan investments $ 2,370 $ 2,370 $ - $ -
Equity securities $ 591 $ 591 $ - $ -
Fair Value Measurements at Reporting Date Using:
(in thousands) December 31, 2023 Quoted Prices in Significant Other Significant
Active Markets Observable Unobservable
(Level 1) Inputs Inputs
(Level 2) (Level 3)
Assets (Liabilities)
Cash equivalents:
Money market funds $ 170,821 $ 170,821 $ - $ -
Short-term investments:
Other short-term investments $ 189 $ - $ 189 $ -
Deferred compensation plan investments $ 2,337 $ 2,337 $ - $ -
Equity securities $ 634 $ 634 $ - $ -
Forward contracts $ ( $ - $ ( $ -
412 412
) )
The cash equivalents in the preceding tables represent money market funds,
valued at net asset value, with carrying values which approximate their fair
values because of their short-term nature.
14
-------------------------------------------------------------------------------
Table of Contents
The short-term investments in the preceding tables represent available-for-sale
debt securities and time deposits.
The deferred compensation plan investments in the preceding tables represent
trading securities held in a rabbi trust for the benefit of non-employee
directors. These securities consist of mutual funds traded in an active market
with quoted prices. As a result, the plan assets are classified as Level 1 in
the fair value hierarchy. The plan assets are recorded within other long-term
assets on our condensed consolidated balance sheets.
The equity securities represent our investment in a publicly traded company.
These securities are traded in an active market with quoted prices. As a
result, the securities are classified as Level 1 in the fair value hierarchy.
The securities are recorded within other long-term assets on our condensed
consolidated balance sheets.
The forward contracts represent currency hedges to mitigate exchange rate
exposure. These contracts are classified within Level 2 because these
contracts are not actively traded and the valuation inputs are based on quoted
prices and market observable data of similar instruments. The liabilities
associated with the forward contracts are recorded at fair value in other
accrued expenses and liabilities in our condensed consolidated balance sheets.
10.
Leases
Our right-of-use assets and lease liabilities primarily include operating
leases for office space. Our executive offices and those related to certain
domestic product development, marketing, production and administration are
located in a
186,000
square foot office facility in Canonsburg, Pennsylvania. The term of the lease
is
183
months, which began on October 1, 2014 and expires on December 31, 2029. The
lease agreement includes options to renew the contract through August 2044, an
option to lease additional space in January 2025 and an option to terminate
the lease in December 2025. No options are included in the lease liability.
Absent the exercise of options in the lease, our remaining base rent
(inclusive of property taxes and certain operating costs) is $
4.5
million per annum through 2024 and $
4.7
million per annum for 2025 - 2029.
The components of our global lease cost reflected in the condensed
consolidated statements of income are as follows:
Three Months Ended
(in thousands) March 31, March 31,
2024 2023
Lease liability cost $ 7,328 $ 7,041
Variable lease cost not included in the lease liability 1,383 1,183
(1)
Total lease cost $ 8,711 $ 8,224
(1)
Variable lease cost includes common area maintenance, property taxes,
utilities and fluctuations in rent due to a change in an index or rate.
Other information related to operating leases is as follows:
Three Months Ended
(in thousands) March 31, March 31,
2024 2023
Cash paid for amounts included in the measurement of the lease liability:
Operating cash flows from operating leases $ ( $ (
7,213 6,779
) )
Right-of-use assets obtained in exchange for new operating lease liabilities $ 1,389 $ 4,414
As of March 31,
2024 2023
Weighted-average remaining lease term of operating leases 6.2 6.7
years years
Weighted-average discount rate of operating leases 3.4 % 3.2 %
15
-------------------------------------------------------------------------------
Table of Contents
The maturity schedule of the operating lease liabilities as of March 31, 2024
is as follows:
(in thousands)
Remainder of 2024 $ 20,216
2025 23,107
2026 20,629
2027 18,789
2028 17,132
Thereafter 30,774
Total future lease payments 130,647
Less: Present value adjustment (
12,791
)
Present value of future lease payments $ 117,856
(1)
(1)
Includes the current portion of operating lease liabilities of $
22.5
million, which is reflected in other accrued expenses and liabilities in the
condensed consolidated balance sheets.
There were no material leases that have been signed but not yet commenced as
of March 31, 2024.
11.
Debt
On June 30, 2022, we entered into a credit agreement (as amended, the 2022
Credit Agreement) with PNC Bank, National Association, as administrative
agent, swing line lender, and an L/C issuer, the lenders party thereto, and
the other L/C issuers party thereto. The 2022 Credit Agreement refinanced our
previous credit agreements in their entirety. Terms used in this description
of the 2022 Credit Agreement with initial capital letters that are not
otherwise defined herein are as defined in the 2022 Credit Agreement.
The 2022 Credit Agreement provides for a $
755.0
million unsecured term loan facility and a $
500.0
million unsecured revolving loan facility, which includes a $
50.0
million sublimit for the issuance of letters of credit. The revolving loan
facility is available for working capital and general corporate purposes. Each
of the term loan facility and the revolving loan facility matures on June 30,
2027.
Borrowings under the term loan and revolving loan facilities accrue interest
at a rate that is based on the Term SOFR plus an applicable margin or at the
base rate plus an applicable margin, at our election. The base rate is the
highest of (i) the Overnight Bank Funding Rate, plus
0.500
%, (ii) the PNC Bank, National Association prime rate, and (iii) Daily Simple
SOFR plus an adjustment for SOFR plus
1.00
%. The applicable margin for the borrowings is a percentage per annum based on
the lower of (1) a pricing level determined by our then-current consolidated
net leverage ratio and (2) a pricing level determined by our public debt
rating (if available).
On September 29, 2023, the 2022 Credit Agreement was amended to provide for an
interest rate adjustment (Sustainability Rate Adjustment) based upon the
achievement of certain environmental, social and governance key performance
indicators (KPIs). The Sustainability Rate Adjustment range is +/-
0.05
% and will be adjusted annually based on the KPIs of the preceding year.
The 2022 Credit Agreement also provides for the option to add certain foreign
subsidiaries as borrowers and to borrow in Euros, Sterling, Yen and Swiss
Francs under the revolving loan facility, up to a sublimit of $
150.0
million. Borrowings under the revolving loan facility denominated in these
currencies will accrue interest at a rate that is based on (a) for Euros, STR,
(b) for Sterling, SONIA, (c) for Yen, TONAR and (d) for Swiss Francs, SARON,
plus an applicable margin calculated as described above.
Under the 2022 Credit Agreement, the weighted average interest rate in effect
for the three months ended March 31, 2024 and March 31, 2023 was
6.32
% and
5.56
%, respectively. The rate in effect as of March 31, 2024 and for the second
quarter of 2024 under the 2022 Credit Agreement is
6.23
%.
The 2022 Credit Agreement contains customary representations and warranties,
affirmative and negative covenants and events of default. The 2022 Credit
Agreement also contains a financial covenant requiring us and our subsidiaries
to maintain a consolidated net leverage ratio not in excess of
3.50
to 1.00 as of the end of any fiscal quarter (for the four-quarter period
ending on such date) with an opportunity for a temporary increase in such
consolidated net leverage ratio to
4.00
to 1.00 upon the consummation of certain qualified acquisitions for which the
aggregate consideration is at least $
250.0
million.
16
-------------------------------------------------------------------------------
Table of Contents
As of March 31, 2024, we had $
755.0
million of borrowings outstanding under the term loan, with a carrying value
of $
754.0
million, which is net of $
1.0
million of unamortized debt discounts and issuance costs. The total amount was
included in long-term debt. As of March 31, 2024, no borrowings were
outstanding under the revolving loan facility.
As of December 31, 2023, we had $
755.0
million of borrowings outstanding under the term loan, with a carrying value
of $
753.9
million, which is net of $
1.1
million of unamortized debt discounts and issuance costs. The total amount was
included in long-term debt. As of December 31, 2023, no borrowings were
outstanding under the revolving loan facility.
We were in compliance with all covenants under the 2022 Credit Agreement as of
March 31, 2024 and December 31, 2023.
12.
Income Taxes
Our income before income tax provision, income tax provision and effective tax
rates were as follows:
Three Months Ended
(in thousands, except percentages) March 31, March 31,
2024 2023
Income before income tax provision $ 40,958 $ 120,838
Income tax provision $ 6,180 $ 20,216
Effective tax rate 15.1 % 16.7 %
13.
Stock Repurchase Program
There were no share repurchases in the first quarter of 2024. For the three
months ended March 31, 2023,
650
thousand shares were repurchased at an average price of $
302.34
per share, with a total cost of $
196.5
million. As of March 31, 2024,
1.1
million shares remained available for repurchase under the program.
14.
Stock-Based Compensation
Total stock-based compensation expense and its net impact on basic and diluted
earnings per share are as follows:
Three Months Ended
(in thousands, except per share data) March 31, March 31,
2024 2023
Cost of sales:
Maintenance and service $ 3,343 $ 2,878
Operating expenses:
Selling, general and administrative 34,208 23,905
Research and development 21,113 17,388
Stock-based compensation expense before taxes 58,664 44,171
Related income tax benefits ( (
23,243 18,186
) )
Stock-based compensation expense, net of taxes $ 35,421 $ 25,985
Net impact on earnings per share:
Basic earnings per share $ ( $ (
0.41 0.30
) )
Diluted earnings per share $ ( $ (
0.40 0.30
) )
17
-------------------------------------------------------------------------------
Table of Contents
15.
Geographic Information
Revenue to external customers is attributed to individual countries based upon
the location of the customer.
Revenue by geographic area is as follows:
Three Months Ended
(in thousands) March 31, March 31,
2024 2023
United States $ 199,948 $ 246,707
China and Hong Kong 44,934 39,436
Japan 36,532 38,086
Germany 36,198 38,674
South Korea 24,370 21,864
Other Europe, Middle East and Africa (EMEA) 82,417 82,404
Other international 42,206 42,276
Total revenue $ 466,605 $ 509,447
Property and equipment by geographic area is as follows:
(in thousands) March 31, December 31,
2024 2023
United States $ 59,674 $ 56,421
France 5,301 4,771
India 4,897 5,057
Other EMEA 6,706 6,924
Other international 4,352 4,607
Total property and equipment, net $ 80,930 $ 77,780
16.
Contingencies and Commitments
We are subject to various claims, investigations, and legal and regulatory
proceedings that arise in the ordinary course of business, including, but not
limited to, commercial disputes, labor and employment matters, tax audits,
alleged infringement of third parties' intellectual property rights and other
matters. In our opinion, the resolution of pending matters is not expected to
have a material adverse effect on our consolidated results of operations, cash
flows or financial position. However, each of these matters is subject to
various uncertainties and it is possible that an unfavorable resolution of one
or more of these proceedings could materially affect our consolidated results
of operations, cash flows or financial position.
Our Indian subsidiary has several service tax audits pending that have
resulted in formal inquiries being received on transactions through mid-2012.
We could incur tax charges and related liabilities of $
7.2
million. As such charges are not probable at this time, a reserve has not been
recorded on the condensed consolidated balance sheet as of March 31, 2024. The
service tax issues raised in our notices and inquiries are very similar to the
case, M/s Microsoft Corporation (I) (P) Ltd. Vs. Commissioner of Service Tax,
New Delhi, wherein the Delhi Customs, Excise and Service Tax Appellate
Tribunal (CESTAT) issued a favorable ruling to Microsoft. The Microsoft ruling
was subsequently challenged in the Supreme Court of India by the Indian tax
authority and a decision is still pending. We can provide no assurances on the
impact that the present Microsoft case's decision will have on our cases,
however, an unfavorable ruling in the Microsoft case may impact our assessment
of probability and result in the recording of a $
7.2
million reserve. We are uncertain as to when these service tax matters will be
concluded.
We sell software licenses and services to our customers under contractual
agreements. Such agreements generally include certain provisions indemnifying
the customer against claims, by third parties, of infringement or
misappropriation of their intellectual property rights arising from such
customer's usage of our products or services. To date, payments related to
these indemnification provisions have been immaterial. For several reasons,
including the lack of prior material indemnification claims, we cannot
determine the maximum amount of potential future payments, if any, related to
such indemnification provisions.
18
-------------------------------------------------------------------------------
Table of Contents
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The following discussion and analysis should be read in conjunction with the
accompanying unaudited condensed consolidated financial statements and notes
thereto for the three months ended March 31, 2024, and with our audited
consolidated financial statements and notes thereto for the year ended
December 31, 2023 included in the 2023 Form 10-K filed with the Securities and
Exchange Commission (SEC). The discussion and analysis of our financial
condition and results of operations are based upon our condensed consolidated
financial statements, which have been prepared in accordance with generally
accepted accounting principles (GAAP).
Business
Ansys, a corporation formed in 1994, develops and globally markets engineering
simulation software and services widely
used by engineers, designers, researchers and students across a broad spectrum
of industries and academia, including high-tech, aerospace and defense,
automotive, energy, industrial equipment, materials and chemicals, consumer
products, healthcare and construction.
Headquartered south of Pittsburgh, Pennsylvania, we employed 6,200 people as
of March 31, 2024 and December 31, 2023. We focus on the development of open
and flexible solutions that enable users to analyze designs on-premises and/or
via the cloud, providing a common platform for fast, efficient and
cost-conscious product development, from design concept to final-stage
testing, validation and deployment. We distribute our suite of simulation
technologies through direct sales offices in strategic, global locations and a
global network of independent resellers and distributors (collectively,
channel partners). It is our intention to continue to maintain this hybrid
sales and distribution model. We operate and report as one segment.
When visionary companies need to know how their world-changing ideas will
perform, they close the gap between design and reality using Ansys simulation.
For more than 50 years, Ansys software has enabled innovators across
industries to push the boundaries of product design by using the predictive
power of simulation. From sustainable transportation and advanced satellite
systems to life-saving medical devices, Ansys powers innovation that drives
human advancement.
Our strategy of Pervasive Insights seeks to deepen the use of simulation in
our core market, to inject simulation throughout the product lifecycle and
extend the accessibility to a broader set of users and use cases. Our business
has three vectors of growth:
.
More products. Our broad and deep multiphysics portfolio enables us to grow
with customers as they use simulation to solve more complex problems across a
broad set of industries.
.
More users. Investments in simulation education and user experience
simplification has made simulation more accessible to a broader user base.
.
More computations. Larger and more complex simulations drive more computation,
requiring customers to use more Ansys licenses to complete their simulations.
Through decades of investments in the academic community and enhanced user
experiences, our solutions have become accessible and relevant beyond our core
"engineering" end user, to reach more users upstream and downstream from our
core, which is the product validation process. Our multiphysics solutions
enable our customers to address increasingly complex research and development
(R&D) challenges from the component through the system and mission level of
analysis. Our products seamlessly enable access to high performance compute
capacity to run simulations, on-premises or in the cloud, which means our
customers' R&D teams are unencumbered by compute capacity limitations that can
hinder R&D cycle times. Our investments in artificial intelligence
capabilities across our simulation portfolio and technical support services
enhance the customer experience, democratize simulation and further
next-generation innovation.
The engineering simulation software market is strong and growing. The market
growth is driven by customers' need for rapid, quality innovation in a cost
efficient manner, enabling faster time to market for new products and lower
warranty costs. Increasing product complexity is driving sustained demand for
simulations. Key industry trends fueling customers' increasing needs for
simulation include:
.
Electrification;
.
Autonomy;
.
Connectivity;
.
The industrial internet of things; and
.
Sustainability, including minimizing waste and physical prototyping, and
improving circularity and development time.
19
-------------------------------------------------------------------------------
Table of Contents
We have bee
n investing and intend to continue
to invest in our portfolio
to
broaden the range of physics and enable customers to analyze the interactions
among physics at the component, system and mission level. Our strategy of
Pervasive Insights is aligned with the near-term market growth opportunities
and is laying the foundation for a future where simulation can be further
democratized to broader classes of end users and end-use cases.
In addition, we have and expect to continue to partner with industry leaders
to extend simulation into other ecosystems and customer R&D workflows.
We license our technology to businesses in a diverse set of industries,
educational institutions and governmental agencies. We believe that the
features, functionality and integrated multiphysics capabilities of our
software products are as strong as they have ever been. The software business
is generally characterized by long sales cycles which increase the difficulty
of predicting sales for any particular quarter. We make many operational and
strategic decisions based upon short- and long-term sales forecasts that are
impacted not only by these long sales cycles, but also by current global
economic conditions. As a result, we believe that our overall performance is
best measured by fiscal year results rather than by quarterly results.
We address the competition and price pressure that we face in the short- and
long-term by focusing on expanding the breadth, depth, ease of use and quality
of the technologies, features, functionality and integrated multiphysics
capabilities of our software products as compared to our competitors;
investing in research and development to develop new and innovative products
and increasing the capabilities of our existing products; maintaining a
diverse industry footprint and focusing on customer needs, training,
consulting and support; and enhancing our distribution channels. We also
evaluate and execute strategic acquisitions to supplement our global
engineering talent, product offerings and distribution channels.
Synopsys Merger Agreement
On January 15, 2024, we entered into the Merger Agreement with Synopsys and
Merger Sub. The Merger Agreement provides for the merger of Merger Sub with
and into Ansys, with Ansys surviving the merger as a wholly owned subsidiary
of Synopsys (the Merger). Our Board of Directors has unanimously approved the
Merger Agreement and, subject to certain exceptions set forth in the Merger
Agreement, resolved to recommend that our stockholders adopt the Merger
Agreement. If the Merger is consummated, our common stock will be delisted
from the Nasdaq Global Select Market and deregistered under the Exchange Act.
The completion of the Merger is subject to customary closing conditions,
including, among others, approval of the Merger under certain applicable
antitrust and foreign investment regimes and the adoption of the Merger
Agreement by our stockholders. We anticipate the transaction to close in the
first half of 2025.
The foregoing summary of the Merger Agreement and the transactions
contemplated thereby does not purport to be complete and is subject to, and
qualified in its entirety by, the Merger Agreement, which was filed as Exhibit
2.1 to our Current Report on Form 8-K filed on January 16, 2024, and is
incorporated herein by reference.
Overview
Overall GAAP and Non-GAAP Results
This section includes a discussion of GAAP and non-GAAP results. For
reconciliations of non-GAAP results to GAAP results, see the section titled
"Non-GAAP Results" herein.
The 2024 and 2023 period non-GAAP results exclude the income statement effects
of stock-based compensation, excess payroll taxes related to stock-based
compensation, amortization of acquired intangible assets, expenses related to
business combinations and adjustments for the income tax effect of the
excluded items.
Our GAAP and non-GAAP results for the three months ended March 31, 2024 as
compared to the three months ended March 31, 2023 reflected the following
variances:
Three Months Ended March 31, 2024
Revenue (8.4) %
GAAP Operating income (66.1) %
Non-GAAP Operating income (26.0) %
GAAP Diluted earnings per share (65.2) %
Non-GAAP Diluted earnings per share (24.9) %
Our results reflect a decline in revenue during the three months ended March
31, 2024 due to reductions in subscription lease license revenue, partially
offset by an increase in maintenance revenue. We also experienced increased
operating expenses during the three months ended March 31, 2024, primarily due
to increased personnel and acquisition costs. Acquisition costs primarily
consist of costs related to the Merger Agreement with Synopsys.
20
-------------------------------------------------------------------------------
Table of Contents
For 2024, quarterly growth rates will be variable across the quarters and are
affected by the performance comparisons to 2023. Specifically, the first
quarter's operating results reflect a structural timing dynamic affected by
the renewal base this quarter in which fewer lease contracts were up for
renewal, resulting in comparatively lower up-front lease license revenue
recognition, impacting revenue, operating income and EPS. As a comparison, the
first quarter of 2023 reflected a 65% constant currency growth rate in
subscription lease license revenue driven by a meaningful increase in the
value of multi-year deals. Quarterly revenue and ACV in Q1 2024 are not
representative of the momentum in our business given the shifting mix of
license types and renewal cycles that can be volatile quarter to quarter.
While this timing dynamic leads to revenue volatility, it does not represent
changes in customers' software usage or cash flows. This further highlights
the importance of measuring our results based on our fiscal year rather than
individual quarters.
This section also includes a discussion of constant currency results, which we
use for financial and operational decision-making and as a means to evaluate
period-to-period comparisons by excluding the effects of foreign currency
fluctuations on the reported results. All constant currency results presented
in this Item 2 exclude the effects of foreign currency fluctuations on the
reported results. To present this information, the 2024 period results for
entities whose functional currency is a currency other than the U.S. Dollar
were converted to U.S. Dollars at rates that were in effect for the 2023
comparable period, rather than the actual exchange rates in effect for the
2024 period. Constant currency growth rates are calculated by adjusting the
2024 period reported amounts by the 2024 period currency fluctuation impacts
and comparing to the 2023 comparable period reported amounts.
Impact of Foreign Currency
Our comparative financial results were impacted by fluctuations in the U.S.
Dollar during the three months ended March 31, 2024 as compared to the three
months ended March 31, 2023. The impacts on our revenue and operating income
as a result of the fluctuations of the U.S. Dollar when measured against our
foreign currencies based on 2023 period exchange rates are reflected in the
table below. Amounts in parenthesis indicate an adverse impact from currency
fluctuations.
(in thousands) Three Months Ended March 31, 2024
Revenue $ (3,903)
GAAP Operating income $ (3,398)
Non-GAAP Operating income $ (3,178)
In constant currency, our variances were as follows:
Three Months Ended March 31, 2024
Revenue (7.6) %
GAAP Operating income (63.4) %
Non-GAAP Operating income (24.4) %
21
-------------------------------------------------------------------------------
Table of Contents
Other Key Business Metric
Annual Contract Value (ACV)
is a key performance metric and is useful to investors in assessing the
strength and trajectory of our business. ACV is a supplemental metric to help
evaluate the annual performance of the business. Over the life of the
contract, ACV equals the total value realized from a customer. ACV is not
impacted by the timing of license revenue recognition. ACV is used by
management in financial and operational decision-making and in setting sales
targets used for compensation. ACV is not a replacement for, and should be
viewed independently of, GAAP revenue and deferred revenue as ACV is a
performance metric and is not intended to be combined with any of these items.
There is no GAAP measure comparable to ACV. ACV is composed of the following:
.
the annualized value of maintenance and subscription lease contracts with
start dates or anniversary dates during the period, plus
.
the value of perpetual license contracts with start dates during the period,
plus
.
the annualized value of fixed-term services contracts with start dates or
anniversary dates during the period, plus
.
the value of work performed during the period on fixed-deliverable services
contracts.
When we refer to the anniversary dates in the definition of ACV above, we are
referencing the date of the beginning of the next twelve-month period in a
contractually committed multi-year contract. If a contract is three years in
duration, with a start date of July 1, 2024, the anniversary dates would be
July 1, 2025 and July 1, 2026. We label these anniversary dates as they are
contractually committed. While this contract would be up for renewal on July
1, 2027, our ACV performance metric does not assume any contract renewals.
Example 1: For purposes of calculating ACV, a $100,000 subscription lease
contract or a $100,000 maintenance contract with a term of July 1, 2024 - June
30, 2025, would each contribute $100,000 to ACV for fiscal year 2024 with no
contribution to ACV for fiscal year 2025.
Example 2: For purposes of calculating ACV, a $300,000 subscription lease
contract or a $300,000 maintenance contract with a term of July 1, 2024 - June
30, 2027, would each contribute $100,000 to ACV in each of fiscal years 2024,
2025 and 2026. There would be no contribution to ACV for fiscal year 2027 as
each period captures the full annual value upon the anniversary date.
Example 3: A perpetual license valued at $200,000 with a contract start date
of March 1, 2024 would contribute $200,000 to ACV in fiscal year 2024.
During the three months ended March 31, 2024 and 2023 our ACV was as follows:
Three Months Ended March 31,
(in thousands, except percentages) 2024 2023 Change
Actual Constant Currency Actual Actual Constant
Currency
Amount Amount % Amount %
ACV $ 407,405 $ 410,433 $ 399,407 $ 7,998 2.0 $ 11,026 2.8
Our trailing twelve-month recurring ACV, converted from the functional
currency to U.S. Dollars at the 2023 period monthly average exchange rates,
was as follows:
Twelve Months Ended March 31, Change
(in thousands, except percentages) 2024 2023 Amount %
Recurring ACV at 2023 monthly average exchange rates $ 1,944,685 $ 1,709,434 $ 235,251 13.8
Recurring ACV includes both subscription lease license and maintenance ACV and
excludes perpetual license and service ACV.
22
-------------------------------------------------------------------------------
Table of Contents
Industry Commentary:
During the first quarter of 2024, ACV growth was supported by our core
industries of aerospace and defense (A&D) and automotive. Despite a decrease
in high-tech ACV during the quarter, we continue to see demand in the industry
as more customers require our semiconductor and multiphysics solutions to
model advanced packaging technologies. We remain critical to our customers'
development of advanced chips, often with bespoke functionality. Our A&D
customers continue to rely on simulation in support of complex, connected and
autonomous platforms. Within the automotive industry, electrification remains
a critical driver of simulation investment in electric vehicles (EVs). Our
portfolio is well-positioned to support automotive companies focused on
addressing tight margins on EV sales and optimizing efficiency in both
operations and vehicle performance. The energy sector also contributed to ACV
growth in the first quarter driven by the need to continually deliver, convert
and consume various forms of fuel more efficiently, as well as develop
scalable, renewable energy sources.
Geographic Trends:
The following table presents our geographic revenue variances using actual and
constant currency rates during the three months ended March 31, 2024 as
compared to the three months ended March 31, 2023:
Three Months Ended March 31, 2024
Actual Constant Currency
Americas (18.8) % (18.8) %
EMEA (2.0) % (3.4) %
Asia-Pacific 6.0 % 10.2 %
Total (8.4) % (7.6) %
The value and duration of multi-year subscription lease contracts executed
during the period significantly impact the recognition of revenue. As a
result, revenue may fluctuate, particularly on a quarterly basis, due to the
timing of such contracts, relative differences in duration of long-term
contracts from quarter to quarter and changes in the mix of license types sold
compared to the prior year. Large swings in revenue growth rates are not
necessarily indicative of customers' software usage changes or cash flows
during the periods presented. To drive growth, we continue to focus on a
number of sales improvement activities across our geographic regions,
including sales hiring, pipeline building, productivity initiatives and
customer engagement activities.
Use of Estimates:
The preparation of our financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues
and expenses, and related disclosure of contingent assets and liabilities. On
an ongoing basis, we evaluate our estimates, including those related to
contract revenue, standalone selling prices of our products and services,
allowance for doubtful accounts receivable, valuation of goodwill and other
intangible assets, useful lives for depreciation and amortization, acquired
deferred revenue, operating lease assets and liabilities, fair values of stock
awards, deferred compensation, income taxes, uncertain tax positions, tax
valuation reserves, and contingencies and litigation. We base our estimates on
historical experience, market experience, estimated future cash flows and
various other assumptions that management believes are reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates.
Forward-Looking Information
This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934 (the Exchange Act). Forward-looking
statements are statements that provide current expectations or forecasts of
future events based on certain assumptions. Forward-looking statements are
subject to risks, uncertainties, and factors relating to our business which
could cause our actual results to differ materially from the expectations
expressed in or implied by such forward-looking statements.
Forward-looking statements use words such as "anticipate," "believe," "could,"
"estimate," "expect," "forecast," "intend," "likely," "may," "outlook,"
"plan," "predict," "project," "should," "target," or other words of similar
meaning. Forward-looking statements include those about market opportunity,
including our total addressable market, the proposed transaction with
Synopsys, Inc., including the expected date of closing and the potential
benefits thereof, and other aspects of future operation. We caution readers
not to place undue reliance upon any such forward-looking statements, which
speak only as of the date they are made. We undertake no obligation to update
forward-looking statements, whether as a result of new information, future
events or otherwise.
23
-------------------------------------------------------------------------------
Table of Contents
The risks associated with the following, among others, could cause actual
results to differ materially from those described in any forward-looking
statements:
.
our ability to complete the proposed transaction with Synopsys on anticipated
terms and timing, including obtaining stockholder and regulatory approvals,
and other conditions related to the completion of the transaction;
.
the realization of the anticipated benefits of the proposed transaction with
Synopsys, including potential disruptions to our and Synopsys' businesses and
commercial relationships with others resulting from the announcement or
completion of the proposed transaction and uncertainty as to the long-term
value of Synopsys' common stock;
.
restrictions during the pendency of the proposed transaction with Synopsys
that could impact our ability to pursue certain business opportunities or
strategic transactions, including tuck-in M&A;
.
adverse conditions in the macroeconomic environment, including inflation,
recessionary conditions and volatility in equity and foreign exchange markets;
political, economic and regulatory uncertainties in the countries and regions
in which we operate;
.
impacts from tariffs, trade sanctions, export controls or other trade
barriers, including export control restrictions and licensing requirements for
exports to China;
.
impacts resulting from the conflict between Israel and Hamas, including
impacts from changes to diplomatic relations and trade policy between the
United States and other countries resulting from the conflict; impacts from
changes to diplomatic relations and trade policy between the United States and
Russia or the United States and other countries that may support Russia or
take similar actions due to the conflict between Russia and Ukraine;
.
constrained credit and liquidity due to disruptions in the global economy and
financial markets, which may limit or delay availability of credit under our
existing or new credit facilities, or which may limit our ability to obtain
credit or financing on acceptable terms or at all;
.
our ability to timely recruit and retain key personnel in a highly competitive
labor market, including potential financial impacts of wage inflation and
potential impacts due to the proposed transaction with Synopsys;
.
our ability to protect our proprietary technology; cybersecurity threats or
other security breaches, including in relation to breaches occurring through
our products and an increased level of our activity that is occurring from
remote global off-site locations; and disclosure and misuse of employee or
customer data whether as a result of a cybersecurity incident or otherwise;
.
increased volatility in our revenue due to the timing, duration and value of
multi-year subscription lease contracts; and our reliance on high renewal
rates for annual subscription lease and maintenance contracts;
.
declines in our customers' businesses resulting in adverse changes in
procurement patterns; disruptions in accounts receivable and cash flow due to
customers' liquidity challenges and commercial deterioration; uncertainties
regarding demand for our products and services in the future and our
customers' acceptance of new products; delays or declines in anticipated sales
due to reduced or altered sales and marketing interactions with customers; and
potential variations in our sales forecast compared to actual sales;
.
our ability and our channel partners' ability to comply with laws and
regulations in relevant jurisdictions; and the outcome of contingencies,
including legal proceedings, government or regulatory investigations and tax
audit cases;
.
uncertainty regarding income tax estimates in the jurisdictions in which we
operate; and the effect of changes in tax laws and regulations in the
jurisdictions in which we operate;
24
-------------------------------------------------------------------------------
Table of Contents
.
the quality of our products, including the strength of features, functionality
and integrated multiphysics capabilities; our ability to develop and market
new products to address the industry's rapidly changing technology; failures
or errors in our products and services; and increased pricing pressure as a
result of the competitive environment in which we operate;
.
investments in complementary companies, products, services and technologies;
our ability to complete and successfully integrate our acquisitions and
realize the financial and business benefits of the transactions; and the
impact indebtedness incurred in connection with any acquisition could have on
our operations;
.
investments in global sales and marketing organizations and global business
infrastructure; and dependence on our channel partners for the distribution of
our products;
.
current and potential future impacts of a global health crisis, natural
disaster or catastrophe, and the actions taken to address these events by our
customers, suppliers, regulatory authorities and our business, on the global
economy and consolidated financial statements, and other public health and
safety risks; and government actions or mandates;
.
operational disruptions generally or specifically in connection with
transitions to and from remote work environments; and the failure of our
technological infrastructure or those of the service providers upon whom we
rely including for infrastructure and cloud services;
.
our intention to repatriate previously taxed earnings and to reinvest all
other earnings of our non-U.S. subsidiaries;
.
plans for future capital spending; the extent of corporate benefits from such
spending including with respect to customer relationship management; and
higher than anticipated costs for research and development or a slowdown in
our research and development activities;
.
our ability to execute on our strategies related to environmental, social, and
governance matters, and meet evolving and varied expectations, including as a
result of evolving regulatory and other standards, processes, and assumptions,
the pace of scientific and technological developments, increased costs and the
availability of requisite financing, and changes in carbon markets; and
.
other risks and uncertainties described in our reports filed from time to time
with the Securities and Exchange Commission (SEC).
Important Information and Where to Find It
This document refers to a proposed transaction between Synopsys and Ansys. In
connection with the proposed transaction, Synopsys filed with the SEC, and the
SEC has declared effective on April 17, 2024, a registration statement on Form
S-4 (File No. 333-277912), that included a prospectus with respect to the
shares of common stock of Synopsys to be issued in the proposed transaction
and a proxy statement of Ansys and is referred to as the proxy statement/prospec
tus. Each party may also file other documents regarding the proposed
transaction with the SEC. This document is not a substitute for the proxy
statement/prospectus or registration statement or any other document that
Synopsys or Ansys may file with the SEC. The definitive proxy statement/prospect
us will be mailed to all Ansys stockholders. INVESTORS AND SECURITY HOLDERS
ARE URGED TO READ THE REGISTRATION STATEMENT, PROXY STATEMENT/PROSPECTUS AND
ALL OTHER RELEVANT DOCUMENTS FILED OR THAT WILL BE FILED WITH THE SEC IN
CONNECTION WITH THE PROPOSED TRANSACTION, AS WELL AS ANY AMENDMENTS OR
SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN
THEY BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION.
Investors and security holders may obtain free copies of the registration
statement, proxy statement/prospectus and all other relevant documents filed
or that will be filed with the SEC by Synopsys or Ansys through the website
maintained by the SEC at www.sec.gov.
25
-------------------------------------------------------------------------------
Table of Contents
The documents filed by Synopsys with the SEC also may be obtained free of
charge at Synopsys' website at https://investor.synopsys.com/overview/default.as
px or upon written request to Synopsys at Synopsys, Inc., 675 Almanor Avenue,
Sunnyvale, California 94085, Attention: Investor Relations. The documents
filed by Ansys with the SEC also may be obtained free of charge at Ansys'
website at https://investors.ansys.com/ or upon written request to
kelsey.debriyn@ansys.com.
Participants in the Solicitation
Synopsys, Ansys and their respective directors and executive officers may be
deemed to be participants in the solicitation of proxies from Ansys'
stockholders in connection with the proposed transaction.
Information about Ansys' directors and executive officers and their ownership
of Ansys' common stock is set forth in Ansys' proxy statement for its 2024
Annual Meeting of Stockholders on Schedule 14A filed with the SEC on April 10,
2024. To the extent that holdings of Ansys' securities have changed since the
amounts printed in Ansys' proxy statement, such changes have been or will be
reflected on Statements of Change in Ownership on Form 4 filed with the SEC.
Information about Synopsys' directors and executive officers is set forth in
Synopsys' proxy statement for its 2024 Annual Meeting of Stockholders on
Schedule 14A filed with the SEC on February 16, 2024 and Synopsys' subsequent
filings with the SEC. Additional information regarding the direct and indirect
interests of those persons and other persons who may be deemed participants in
the proposed transaction may be obtained by reading the proxy statement/prospect
us filed by Synopsys and declared effective by the SEC on April 17, 2024, and
any other relevant documents that are filed with the SEC relating to the
proposed transaction. You may obtain free copies of these documents as
described in the preceding paragraph.
No Offer or Solicitation
This document is for informational purposes only and is not intended to and
shall not constitute an offer to buy or sell or the solicitation of an offer
to buy or sell any securities, or a solicitation of any vote or approval, nor
shall there be any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such jurisdiction. No offering of securities
shall be made, except by means of a prospectus meeting the requirements of
Section 10 of the U.S. Securities Act of 1933, as amended.
26
-------------------------------------------------------------------------------
Table of Contents
Results of Operations
The results of operations discussed below are on a GAAP basis unless otherwise
stated.
Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023
Revenue:
Three Months Ended March 31,
(in thousands, 2024 2023 Change
except percentages)
GAAP Constant Currency GAAP GAAP Constant
Currency
Amount Amount % Amount %
Revenue:
Subscription $ 94,800 $ 95,392 $ 147,922 $ (53,122) (35.9) $ (52,530) (35.5)
lease licenses
Perpetual 65,521 65,750 71,230 (5,709) (8.0) (5,480) (7.7)
licenses
Software 160,321 161,142 219,152 (58,831) (26.8) (58,010) (26.5)
licenses
Maintenance 289,340 292,289 268,593 20,747 7.7 23,696 8.8
Service 16,944 17,077 21,702 (4,758) (21.9) (4,625) (21.3)
Maintenance 306,284 309,366 290,295 15,989 5.5 19,071 6.6
and service
Total $ 466,605 $ 470,508 $ 509,447 $ (42,842) (8.4) $ (38,939) (7.6)
revenue
Revenue for the quarter ended March 31, 2024 decreased 8.4% compared to the
quarter ended March 31, 2023, or 7.6% in constant currency. The reported $53.1
million decrease in lease license revenue was attributable to a $53.8 million
decrease in value from multi-year licenses, partially offset by a $0.7 million
increase in value from annual licenses. Perpetual license revenue, which is
derived from new sales during the three months ended March 31, 2024, decreased
8.0%, or 7.7% in constant currency, as compared to the three months ended
March 31, 2023. Driving the decrease in perpetual license revenue was a 22.6%
decrease in the volume of deals, partially offset by a 14.6% increase in
average deal size. Maintenance revenue growth of 7.7%, or 8.8% in constant
currency, is correlated with previous license sales and is driven
substantially by our existing customer base. The reported $20.7 million growth
in maintenance revenue was attributable to a $27.8 million increase in
maintenance associated with lease licenses, partially offset by a $7.1 million
decrease in maintenance associated with perpetual sales.
We continue to experience strong demand from our customers for contracts that
often include longer-term, subscription leases involving a larger number of
our software products. These arrangements typically involve a higher overall
transaction price. The upfront recognition of license revenue related to these
larger transactions can result in significant subscription lease revenue
volatility. Specifically, the first quarter's operating results reflect a
structural timing dynamic affected by the renewal base this quarter in which
fewer lease contracts were up for renewal, resulting in comparatively lower
up-front lease license revenue recognition. Software products, across a large
variety of applications and industries, are increasingly distributed in
software-as-a-service, cloud and other subscription environments in which the
licensing approach is time-based rather than perpetual. This preference could
result in a shift from perpetual licenses to time-based licenses, such as
subscription leases, over the long term.
With respect to revenue, on average for the quarter ended March 31, 2024, the
U.S. Dollar was 2.0% stronger, when measured against our foreign currencies,
than for the quarter ended March 31, 2023. The table below presents the net
impacts of currency fluctuations on revenue for the quarter ended March 31,
2024. Amounts in parenthesis indicate an adverse impact from currency
fluctuations.
(in thousands) Three Months Ended March 31, 2024
Japanese Yen $ (4,289)
South Korean Won (955)
Euro 1,206
Other 135
Total $ (3,903)
27
-------------------------------------------------------------------------------
Table of Contents
As a percentage of revenue, our international and domestic revenues, and our
direct and indirect revenues, were as follows:
Three Months Ended March 31,
2024 2023
International 57.1 % 51.6 %
Domestic 42.9 % 48.4 %
Direct 66.5 % 76.3 %
Indirect 33.5 % 23.7 %
Deferred Revenue and Backlog:
Deferred revenue consists of billings made or payments received in advance of
revenue recognition from customer agreements. The
deferred revenue on our condensed consolidated balance sheet does not
represent the total value of annual or multi-year, noncancellable agreements.
Our backlog represents deferred revenue associated with installment billings
for periods beyond the current quarterly billing cycle and committed contracts
with start dates beyond the end of the current period
. Our deferred revenue and backlog as of March 31, 2024 and December 31, 2023
consisted of the following:
Balance at March 31, 2024
(in thousands) Total Current Long-Term
Deferred revenue $ 454,601 $ 433,167 $ 21,434
Backlog 914,852 433,106 481,746
Total $ 1,369,453 $ 866,273 $ 503,180
Balance at December 31, 2023
(in thousands) Total Current Long-Term
Deferred revenue $ 479,754 $ 457,514 $ 22,240
Backlog 992,830 439,879 552,951
Total $ 1,472,584 $ 897,393 $ 575,191
Revenue associated with deferred revenue and backlog that will be recognized
in the subsequent twelve months is classified as current in the tables above.
28
-------------------------------------------------------------------------------
Table of Contents
Cost of Sales and Operating Expenses:
The tables below reflect our operating results on both a GAAP and constant
currency basis. Amounts included in the discussions that follow each table are
provided in constant currency and are inclusive of costs related to our
acquisitions. The impact of foreign exchange translation is discussed
separately, where material.
Three Months Ended March 31,
2024 2023 Ch
GAAP Constant Currency GAAP GAAP Constan
(in Amount % of Amount % of Amount % of Amount % Amount %
thousands, Revenue Revenue Revenue
except
percentages)
Cost of sales:
Software $ 10,044 2.2 $ 10,007 2.1 $ 11,744 2.3 $ (1,700) (14.5) $ (1,737) (14.8)
licenses
Amortization 22,484 4.8 22,386 4.8 19,618 3.9 2,866 14.6 2,768 14.1
Maintenance 36,139 7.7 36,295 7.7 36,290 7.1 (151) (0.4) 5 -
and service
Total 68,667 14.7 68,688 14.6 67,652 13.3 1,015 1.5 1,036 1.5
cost of
sales
Gross $ 397,938 85.3 $ 401,820 85.4 $ 441,795 86.7 $ (43,857) (9.9) $ (39,975) (9.0)
profit
Software Licenses:
The decrease in the cost of software licenses was primarily due to decreased
third-party royalties of $1.7 million.
Amortization:
The increase in amortization expense was primarily due to recently acquired
intangible assets.
The reduction in gross profit was a result of the decrease in revenue and
increase in the cost of sales.
29
-------------------------------------------------------------------------------
Table of Contents
Three Months Ended March 31,
2024 2023
GAAP Constant Currency GAAP GAAP Co
(in Amount % of Amount % of Amount % of Amount % Amount %
thousands, Revenue Revenue Revenue
except
percentages)
Operating expenses:
Selling, $ 219,643 47.1 $ 220,609 46.9 $ 188,584 37.0 $ 31,059 16.5 $ 32,025 17.0
general
and
administrative
Research and 128,811 27.6 128,382 27.3 120,335 23.6 8,476 7.0 8,047 6.7
development
Amortization 6,145 1.3 6,092 1.3 5,181 1.0 964 18.6 911 17.6
Total 354,599 76.0 355,083 75.5 314,100 61.7 40,499 12.9 40,983 13.0
operating
expenses
Operating $ 43,339 9.3 $ 46,737 9.9 $ 127,695 25.1 $ (84,356) (66.1) $ (80,958) (63.4)
income
Selling, General and Administrative:
The increase in selling, general and administrative costs was primarily due to
the following:
.
Increased acquisition costs of $12.1 million, primarily due to costs related
to the Merger Agreement with Synopsys.
.
Increased stock-based compensation of $10.3 million.
.
Increased salaries of $7.1 million.
We anticipate that we will continue to make targeted investments in our global
sales and marketing organizations and our global business infrastructure to
enhance and support our revenue-generating activities.
Research and Development:
The increase in research and development costs was primarily due to the
following:
.
Increased salaries of $5.8 million.
.
Increased stock-based compensation of $3.7 million.
We have traditionally invested significant resources in research and
development activities and expect to continue to make investments in expanding
the ease of use and capabilities of our broad portfolio of simulation software
products.
The impacts from currency fluctuations result
ed i
n decreased operating income of $3.4 million for the quarter ended March 31,
2024 as compared to the quarter ended March 31, 2023.
Interest Income
:
Interest income for the three months ended March 31, 2024 was $11.0 million as
compared to $4.1 million for the three months ended March 31, 2023. Interest
income increased as a result of a higher invested cash balance, a higher
interest rate environment and the related increase in the average rate of
return on invested cash balances.
Interest Expense:
Interest expense for the quarter ended March 31, 2024 was $12.4 million as
compared to $10.8 million for the quarter ended March 31, 2023 due to a higher
interest rate environment.
Other Expense, net:
Other expense consisted primarily of net foreign currency losses during the
three months ended March 31, 2024 and 2023.
30
-------------------------------------------------------------------------------
Table of Contents
Income Tax Provision:
Our income before income tax provision, income tax provision and effective tax
rates were as follows:
Three Months Ended March 31,
(in thousands, except percentages) 2024 2023
Income before income tax provision $ 40,958 $ 120,838
Income tax provision $ 6,180 $ 20,216
Effective tax rate 15.1 % 16.7 %
The decrease in the effective tax rate for the three months ended March 31,
2024 was a result of increased benefits related to research and development
credits and stock-based compensation.
When compared to the federal and state combined statutory rate for each
respective period, the effective tax rates for the quarters ended March 31,
2024 and March 31, 2023 were favorably impacted by the foreign-derived
intangible income (FDII) deduction, stock-based compensation deductions and
research and development credits, partially offset by the impact of
non-deductible compensation.
Net Income:
Our net income, diluted earnings per share and weighted average shares used in
computing diluted earnings per share were as follows:
Three Months Ended March 31,
(in thousands, except per share data) 2024 2023
Net income $ 34,778 $ 100,622
Diluted earnings per share $ 0.40 $ 1.15
Weighted average shares outstanding - diluted 87,780 87,431
31
-------------------------------------------------------------------------------
Table of Contents
Non-GAAP Results
We provide non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP
operating income, non-GAAP operating profit margin, non-GAAP net income and
non-GAAP diluted earnings per share as supplemental measures to GAAP regarding
our operational performance. These financial measures exclude the impact of
certain items and, therefore, have not been calculated in accordance with
GAAP. A detailed explanation and a reconciliation of each non-GAAP financial
measure to its most comparable GAAP financial measure are included below, as
applicable.
ANSYS, INC. AND SUBSIDIARIES
Reconciliations of GAAP to Non-GAAP Measures
(Unaudited)
Three Months Ended
March 31, 2024
(in thousands, Gross Profit % of Revenue Operating Income % of Revenue Net Income EPS - Diluted
except 1
percentages and
per share data)
Total GAAP $ 397,938 85.3 % $ 43,339 9.3 % $ 34,778 $ 0.40
Stock-based 3,343 0.7 % 58,664 12.7 % 58,664 0.66
compensation
expense
Excess payroll 378 0.1 % 5,362 1.1 % 5,362 0.06
taxes related
to stock-based
awards
Amortization 22,484 4.8 % 28,629 6.1 % 28,629 0.33
of intangible
assets from
acquisitions
Expenses - - % 14,261 3.0 % 14,261 0.16
related to
business
combinations
Adjustment for - - % - - % (19,698) (0.22)
income tax
effect
Total $ 424,143 90.9 % $ 150,255 32.2 % $ 121,996 $ 1.39
non-GAAP
1
Diluted weighted average shares were 87,780.
Three Months Ended
March 31, 2023
(in thousands, Gross Profit % of Revenue Operating Income % of Revenue Net Income EPS - Diluted
except 1
percentages and
per share data)
Total GAAP $ 441,795 86.7 % $ 127,695 25.1 % $ 100,622 $ 1.15
Stock-based 2,878 0.6 % 44,171 8.7 % 44,171 0.50
compensation
expense
Excess payroll 284 0.1 % 4,076 0.8 % 4,076 0.05
taxes related
to stock-based
awards
Amortization 19,618 3.8 % 24,799 4.8 % 24,799 0.28
of intangible
assets from
acquisitions
Expenses - - % 2,192 0.4 % 2,192 0.03
related to
business
combinations
Adjustment for - - % - - % (14,097) (0.16)
income tax
effect
Total $ 464,575 91.2 % $ 202,933 39.8 % $ 161,763 $ 1.85
non-GAAP
1
Diluted weighted average shares were 87,431.
32
-------------------------------------------------------------------------------
Table of Contents
We use non-GAAP financial measures (a) to evaluate our historical and
prospective financial performance as well as our performance relative to our
competitors, (b) to set internal sales targets and spending budgets, (c) to
allocate resources, (d) to measure operational profitability and the accuracy
of forecasting, (e) to assess financial discipline over operational
expenditures and (f) as an important factor in determining variable
compensation for management and employees. In addition, many financial
analysts that follow us focus on and publish both historical results and
future projections based on non-GAAP financial measures. We believe that it is
in the best interest of our investors to provide this information to analysts
so that they accurately report the non-GAAP financial information. Moreover,
investors have historically requested, and we have historically reported,
these non-GAAP financial measures as a means of providing consistent and
comparable information with past reports of financial results.
While we believe that these non-GAAP financial measures provide useful
supplemental information to investors, there are limitations associated with
the use of these non-GAAP financial measures. These non-GAAP financial
measures are not prepared in accordance with GAAP, are not reported by all our
competitors and may not be directly comparable to similarly titled measures of
our competitors due to potential differences in the exact method of
calculation. We compensate for these limitations by using these non-GAAP
financial measures as supplements to GAAP financial measures and by reviewing
the reconciliations of the non-GAAP financial measures to their most
comparable GAAP financial measures.
The adjustments to these non-GAAP financial measures, and the basis for such
adjustments, are outlined below:
Amortization of intangible assets from acquisitions.
We incur amortization of intangible assets, included in our GAAP presentation
of amortization expense, related to various acquisitions we have made. We
exclude these expenses for the purpose of calculating non-GAAP gross profit,
non-GAAP gross profit margin, non-GAAP operating income, non-GAAP operating
profit margin, non-GAAP net income and non-GAAP diluted earnings per share
when we evaluate our continuing operational performance because these costs
are fixed at the time of an acquisition, are then amortized over a period of
several years after the acquisition and generally cannot be changed or
influenced by us after the acquisition. Accordingly, we do not consider these
expenses for purposes of evaluating our performance during the applicable time
period after the acquisition, and we exclude such expenses when making
decisions to allocate resources. We believe that these non-GAAP financial
measures are useful to investors because they allow investors to (a) evaluate
the effectiveness of the methodology and information used by us in our
financial and operational decision-making, and (b) compare our past reports of
financial results as we have historically reported these non-GAAP financial
measures.
Stock-based compensation expense
. We incur expense related to stock-based compensation included in our GAAP
presentation of cost of maintenance and service; research and development
expense; and selling, general and administrative expense. This non-GAAP
adjustment also includes excess payroll tax expense related to stock-based
compensation. Although stock-based compensation is an expense and viewed as a
form of compensation, we exclude these expenses for the purpose of calculating
non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP operating
income, non-GAAP operating profit margin, non-GAAP net income and non-GAAP
diluted earnings per share when we evaluate our continuing operational
performance. Specifically, we exclude stock-based compensation during our
annual budgeting process and our quarterly and annual assessments of our
performance. The annual budgeting process is the primary mechanism whereby we
allocate resources to various initiatives and operational requirements.
Additionally, the annual review by our Board of Directors during which it
compares our historical business model and profitability to the planned
business model and profitability for the forthcoming year excludes the impact
of stock-based compensation. In evaluating the performance of our senior
management and department managers, charges related to stock-based
compensation are excluded from expenditure and profitability results. In fact,
we record stock-based compensation expense into a stand-alone cost center for
which no single operational manager is responsible or accountable. In this
way, we can review, on a period-to-period basis, each manager's performance
and assess financial discipline over operational expenditures without the
effect of stock-based compensation. We believe that these non-GAAP financial
measures are useful to investors because they allow investors to (a) evaluate
our operating results and the effectiveness of the methodology used by us to
review our operating results, and (b) review historical comparability in our
financial reporting as well as comparability with competitors' operating
results.
33
-------------------------------------------------------------------------------
Table of Contents
Expenses related to business combinations.
We incur expenses for professional services rendered in connection with
business combinations, which are included in our GAAP presentation of selling,
general and administrative expense. We also incur other expenses directly
related to business combinations, including compensation expenses and
concurrent restructuring activities, such as employee severances and other
exit costs. These costs are included in our GAAP presentation of selling,
general and administrative and research and development expenses. We exclude
these acquisition-related expenses for the purpose of calculating non-GAAP
operating income, non-GAAP operating profit margin, non-GAAP net income and
non-GAAP diluted earnings per share when we evaluate our continuing
operational performance, as we generally would not have otherwise incurred
these expenses in the periods presented as a part of our operations. We
believe that these non-GAAP financial measures are useful to investors because
they allow investors to (a) evaluate our operating results and the
effectiveness of the methodology used by us to review our operating results,
and (b) review historical comparability in our financial reporting as well as
comparability with competitors' operating results.
Non-GAAP tax provision.
We utilize a normalized non-GAAP annual effective tax rate (AETR) to calculate
non-GAAP measures. This methodology provides better consistency across interim
reporting periods by eliminating the effects of non-recurring items and
aligning the non-GAAP tax rate with our expected geographic earnings mix. To
project this rate, we analyzed our historic and projected non-GAAP earnings
mix by geography along with other factors such as our current tax structure,
recurring tax credits and incentives, and expected tax positions. On an annual
basis we re-evaluate and update this rate for significant items that may
materially affect our projections.
Non-GAAP financial measures are not in accordance with, or an alternative for,
GAAP. Our non-GAAP financial measures are not meant to be considered in
isolation or as a substitute for comparable GAAP financial measures and should
be read only in conjunction with our consolidated financial statements
prepared in accordance with GAAP.
We have provided a reconciliation of the non-GAAP financial measures to the
most directly comparable GAAP financial measures as listed below:
GAAP Reporting Measure Non-GAAP Reporting Measure
Gross Profit Non-GAAP Gross Profit
Gross Profit Margin Non-GAAP Gross Profit Margin
Operating Income Non-GAAP Operating Income
Operating Profit Margin Non-GAAP Operating Profit Margin
Net Income Non-GAAP Net Income
Diluted Earnings Per Share Non-GAAP Diluted Earnings Per Share
Constant currency.
In addition to the non-GAAP financial measures detailed above, we use constant
currency results for financial and operational decision-making and as a means
to evaluate period-to-period comparisons by excluding the effects of foreign
currency fluctuations on the reported results. To present this information,
the 2024 results for entities whose functional currency is a currency other
than the U.S. Dollar were converted to U.S. Dollars at rates that were in
effect for the 2023 comparable period, rather than the actual exchange rates
in effect for the 2024 period. Constant currency growth rates are calculated
by adjusting the 2024 reported amounts by the 2024 currency fluctuation
impacts and comparing the adjusted amounts to the 2023 comparable period
reported amounts. We believe that these non-GAAP financial measures are useful
to investors because they allow investors to (a) evaluate the effectiveness of
the methodology and information used by us in our financial and operational
decision-making, and (b) compare our reported results to our past reports of
financial results without the effects of foreign currency fluctuations.
34
-------------------------------------------------------------------------------
Table of Contents
Liquidity and Capital Resources
Change
(in thousands, except percentages) March 31, December 31, Amount %
2024 2023
Cash, cash equivalents and short-term investments $ 1,070,609 $ 860,390 $ 210,219 24.4
Working capital $ 1,274,597 $ 1,160,273 $ 114,324 9.9
Cash, Cash Equivalents and Short-Term Investments
Cash and cash equivalents consist primarily of highly liquid investments such
as money market funds and deposits held at major banks. Short-term investments
consist of available-for-sale debt securities with remaining maturities
greater than three months at the date of purchase and time deposits. The
following table presents our foreign and domestic holdings of cash, cash
equivalents and short-term investments as of March 31, 2024 and December 31,
2023:
(in thousands, except percentages) March 31, % of Total December 31, % of Total
2024 2023
Domestic $ 670,428 62.6 $ 529,092 61.5
Foreign 400,181 37.4 331,298 38.5
Total $ 1,070,609 $ 860,390
In general, it is our intention to permanently reinvest all earnings in excess
of previously taxed amounts. Substantially all of the pre-2018 earnings of our
non-U.S. subsidiaries were taxed through the transition tax and post-2018
current earnings are taxed as part of global intangible low-taxed income tax
expense. These taxes increase our previously taxed earnings and allow for the
repatriation of the majority of our foreign earnings without any residual U.S.
federal tax. Unrecognized provisions for taxes on indefinitely reinvested
undistributed earnings of foreign subsidiaries would not be significant.
The amount of cash, cash equivalents and short-term investments held by
foreign subsidiaries is subject to translation adjustments caused by changes
in foreign currency exchange rates as of the end of each respective reporting
period, the offset to which is recorded in accumulated other comprehensive
loss on our condensed consolidated balance sheet.
Cash Flows from Operating Activities
Three Months Ended March 31, Change
(in thousands, except percentages) 2024 2023 Amount %
Net cash provided by operating activities $ 282,817 $ 260,766 $ 22,051 8.5
Net cash provided by operating activities increased during the three months
ended March 31, 2024 compared to the three months ended March 31, 2023. The
increase in net cash provided by operating activities was a result of
increased customer receipts driven primarily by ACV growth, partially offset
by increased payments related to higher operating expenses and income tax
payments, as compared to the three months ended March 31, 2023.
Cash Flows from Investing Activities
Three Months Ended March 31, Change
(in thousands, except percentages) 2024 2023 Amount %
Net cash used in investing activities $ (34,436) $ (128,390) $ 93,954 73.2
Net cash used in investing activities decreased by $94.0 million during the
three months ended March 31, 2024 compared to the three months ended March 31,
2023 due to decreased acquisition-related net cash outlays of $120.6 million,
partially offset by increased purchases of short-term investments of $19.9
million and capital expenditures of $3.7 million. We currently plan capital
spending of $40.0 million to $50.0 million during fiscal year 2024 as compared
to the $25.3 million that was spent in fiscal year 2023. The level of spending
will depend on various factors, including the growth of the business and
general economic conditions.
35
-------------------------------------------------------------------------------
Table of Contents
Cash Flows from Financing Activities
Three Months Ended March 31, Change
(in thousands, except percentages) 2024 2023 Amount %
Net cash used in financing activities $ (54,643) $ (240,828) $ 186,185 77.3
Net cash used in financing activities decreased during the three months ended
March 31, 2024 compared to the three months ended March 31, 2023 due to
decreased stock repurchases of $196.5 million.
Other Cash Flow Information
On June 30, 2022, we entered into a credit agreement (as amended, the 2022
Credit Agreement) with PNC Bank, National Association as administrative agent,
swing line lender, and an L/C issuer, the lenders party thereto, and the other
L/C issuers party thereto. The 2022 Credit Agreement refinanced our previous
credit agreements in their entirety. The 2022 Credit Agreement provides for a
$755.0 million unsecured term loan facility and a $500.0 million unsecured
revolving loan facility, which includes a $50.0 million sublimit for the
issuance of letters of credit. Terms used in this description of the 2022
Credit Agreement with initial capital letters that are not otherwise defined
herein are as defined in the 2022 Credit Agreement.
As of March 31, 2024, the carrying value of our term loan was $754.0 million,
with no principal payments due in the next twelve months. Borrowings under the
term loan and revolving loan facilities accrue interest at a rate that is
based on the Term SOFR plus an applicable margin or at the base rate plus an
applicable margin, at our election. The base rate is the highest of (i) the
Overnight Bank Funding Rate, plus 0.500%, (ii) the PNC Bank, National
Association prime rate, and (iii) Daily Simple SOFR plus an adjustment for
SOFR plus 1.00%. The applicable margin for the borrowings is a percentage per
annum based on the lower of (1) a pricing level determined by our then-current
consolidated net leverage ratio and (2) a pricing level determined by our
public debt rating (if available).
On September 29, 2023, the 2022 Credit Agreement was amended to provide for an
interest rate adjustment (Sustainability Rate Adjustment) based upon the
achievement of certain environmental, social and governance key performance
indicators (KPIs). The Sustainability Rate Adjustment range is +/- 0.05% and
will be adjusted annually based on the KPIs of the preceding year.
The rate in effect for the second quarter of 2024 under the 2022 Credit
Agreement is 6.23%.
We previously entered into operating lease commitments, primarily for our
domestic and international offices. The commitments related to these operating
leases is $130.6 million, of which $26.2 million is due in the next twelve
months. There
were no share repurchases in the first quarter of 2024. For the three months
ended March 31, 2023, 650 thousand shares were repurchased at an average price
of $302.34 per share, with a total cost of $196.5 million. As of March 31,
2024, 1.1 million shares remained available for repurchase under the program.
We continue to generate positive cash flows from operating activities and
believe that the best uses of our excess cash are to invest in the business;
acquire or make investments in complementary companies, products, services and
technologies; and make payments on our outstanding debt balances. Any future
acquisitions may be funded by available cash and investments, cash generated
from operations, debt financing or the issuance of additional securities.
We believe that existing cash and cash equivalent balances, together with cash
generated from operations and access to our $500.0 million revolving loan
facility, will be sufficient to meet our working capital, capital expenditure
requirements and contractual obligations through at least the next twelve
months and the foreseeable future thereafter. Our cash requirements in the
future may also be financed through additional equity or debt financings.
However, future disruptions in the capital markets could make financing more
challenging, and there can be no assurance that such financing can be obtained
on commercially reasonable terms, or at all.
Contractual and Other Obligations
There were no material changes to our significant contractual and other
obligations during the three months ended March 31, 2024 as compared to those
previously reported within "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in our 2023 Form 10-K.
36
-------------------------------------------------------------------------------
Table of Contents
Critical Accounting Estimates
During the first quarter of 2024, we completed the annual impairment test for
goodwill and the indefinite-lived intangible asset and determined that these
assets had not been impaired as of the test date, January 1, 2024. No events
or circumstances changed during the three months ended March 31, 2024 that
would indicate that the fair values of our reporting unit and indefinite-lived
intangible asset are below their carrying amounts.
No significant changes have occurred to our critical accounting estimates as
previously reported within "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in our 2023 Form 10-K.
37
-------------------------------------------------------------------------------
Table of Contents
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Foreign Currency Exchange Risk.
As we operate in international regions, a portion of our revenue, expenses,
cash, accounts receivable and payment obligations are denominated in foreign
currencies. As a result, changes in currency exchange rates will affect our
financial position, results of operations and cash flows. We seek to reduce
our currency exchange transaction risks primarily through our normal operating
and treasury activities, including the use of derivative instruments.
With respect to revenue, on average for the quarter ended March 31, 2024, the
U.S. Dollar was 2.0% stronger, when measured against our foreign currencies,
than for the quarter ended March 31, 2023. The table below presents the net
impacts of currency fluctuations on revenue for the three months ended March
31, 2024. Amounts in parenthesis indicate a net adverse impact from currency
fluctuations.
(in thousands) Three Months Ended March 31, 2024
Japanese Yen $ (4,289)
South Korean Won (955)
Euro 1,206
Other 135
Total $ (3,903)
The impacts from currency fluctuations resulted in decreased operating income
of $3.4 million for the three months ended March 31, 2024 as compared to the
three months ended March 31, 2023.
A hypothetical 10% strengthening in the U.S. Dollar against other currencies
would have decreased our revenue by $20.0 million and decreased our operating
income by $4.8 million for the three months ended March 31, 2024.
The most meaningful currency impacts on revenue and operating income are
typically attributable to U.S. Dollar exchange rate changes against the Euro
and Japanese Yen. Historical exchange rates for these currency pairs are
reflected in the charts below:
Period-End Exchange Rates
As of EUR/USD USD/JPY
March 31, 2024 1.08 151
December 31, 2023 1.10 141
March 31, 2023 1.08 133
Average Exchange Rates
Three Months Ended EUR/USD USD/JPY
March 31, 2024 1.09 148
March 31, 2023 1.07 132
Interest Rate Risk
. Changes in the overall level of interest rates affect the interest income
that is generated from our cash, cash equivalents and short-term investments
and the interest expense that is incurred from our outstanding borrowings. For
the three months ended March 31, 2024, interest income was $11.0 million and
interest expense was $12.4 million.
Cash and cash equivalents consist primarily of highly liquid investments such
as money market funds and deposits held at major banks. Short-term investments
consist of available-for-sale debt securities with remaining maturities
greater than three months at the date of purchase and time deposits. A
hypothetical 100 basis point change in interest rates on these holdings could
have a $10.7 million impact on our financial results.
Our outstanding term loan borrowings of $755.0 million as of March 31, 2024
accrue interest at a rate that is based on the Term SOFR plus an applicable
margin or at the base rate plus an applicable margin, at our election. The
base rate is the highest of (i) the Overnight Bank Funding Rate, plus 0.500%,
(ii) the PNC Bank, National Association prime rate, and (iii) Daily Simple
SOFR plus an adjustment for SOFR plus 1.00%. The applicable margin for the
borrowings is a percentage per annum based on the lower of (1) a pricing level
determined by our then-current consolidated net leverage ratio and (2) a
pricing level determined by our public debt rating (if available).
On September 29, 2023, the 2022 Credit Agreement was amended to provide for an
interest rate adjustment (Sustainability Rate Adjustment) based upon the
achievement of certain environmental, social and governance key performance
indicators (KPIs). The Sustainability Rate Adjustment range is +/- 0.05% and
will be adjusted annually based on the KPIs of the preceding year.
38
-------------------------------------------------------------------------------
Table of Contents
Because interest rates applicable to the outstanding borrowings are variable,
we are exposed to interest rate risk from changes in the underlying index
rates, which affects our interest expense. A hypothetical increase of 100
basis points in interest rates would result in an increase in interest expense
and a corresponding decrease in cash flows of $7.7 million over the next
twelve months, based on outstanding borrowings at March 31, 2024.
No other material change has occurred in our market risk subsequent to
December 31, 2023.
39
-------------------------------------------------------------------------------
Table of Contents
Item 4.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
.
As required by Rules 13a-15 and 15d-15 of the Exchange Act, we have evaluated,
with the participation of management, including the Chief Executive Officer
and the Chief Financial Officer, the effectiveness of the design and operation
of our disclosure controls and procedures as of the end of the period covered
by this report. Based on such evaluation, the Chief Executive Officer and
Chief Financial Officer have concluded that such disclosure controls and
procedures are effective, as defined in Rule 13a-15(e) and Rule 15d-15(e) of
the Exchange Act.
We believe, based on our knowledge, that the financial statements and other
financial information included in this report fairly present, in all material
respects, our financial condition, results of operations and cash flows as of
and for the periods presented in this report. We are committed to both a sound
internal control environment and to good corporate governance.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with policies or procedures may deteriorate.
From time to time, we review the disclosure controls and procedures, and may
periodically make changes to enhance their effectiveness and to ensure that
our systems evolve with our business.
Changes in Internal Control
.
There were no changes in our internal control over financial reporting that
occurred during the three months ended March 31, 2024 that materially
affected, or that are reasonably likely to materially affect, our internal
control over financial reporting.
40
-------------------------------------------------------------------------------
Table of Contents
PART II - OTHER INFORMATION
Item 1.
Legal Proceedings
We are subject to various claims, investigations and legal and regulatory
proceedings that arise in the ordinary course of business, including, but not
limited to, commercial disputes, labor and employment matters, tax audits,
alleged infringement of third parties' intellectual property rights and other
matters. Use or distribution of our products could generate product liability,
regulatory infraction, or claims by our customers, end users, channel
partners, government entities or third parties. Sales and marketing activities
that impact processing of personal data, as well as measures taken to promote
license compliance against pirated or unauthorized usage of our commercial
products, may also result in claims by customers and individual employees of
customers or by non-customers using pirated versions of our products. Each of
these matters is subject to various uncertainties, and it is possible that an
unfavorable resolution of one or more of these matters could have a
significant adverse effect on our condensed consolidated financial statements
as well as cause reputational damage. In our opinion, the resolution of
pending matters is not expected to have a material adverse effect on our
financial position, results of operations or cash flows.
Item 1A. Risk Factors
We face a number of risks that could materially and adversely affect our
business, prospects, financial condition, results of operations and cash
flows. A discussion of our risk factors can be found in Part I, Item 1A "Risk
Factors" in our 2023 Form 10-K. No material changes have occurred to such risk
factors after the filing of our 2023 Form 10-K.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3.
Defaults Upon Senior Securities
None.
Item 4.
Mine Safety Disclosures
Not applicable.
Item 5.
Other Information
Trading Arrangements
None of the directors or "officers" of ANSYS, Inc. (as defined in Rule
16a-1(f) promulgated under the Exchange Act of 1934, as amended)
adopted
, modified, or
terminated
a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading
arrangement," as each term is defined in Item 408 of Regulation S-K, during
the fiscal quarter ended March 31, 2024.
41
-------------------------------------------------------------------------------
Table of Contents
Item 6.
Exhibits
Exhibit No. Exhibit
2.1 Agreement and Plan of Merger, dated as of January 15, 2024, by
and among Synopsys, Inc., ANSYS, Inc. and ALTA Acquisition Corp.
(filed as Exhibit 2.1 to the Company's Current Report on Form 8-K,
filed January 16, 2024, and incorporated herein by reference)
.
10.1 ANSYS, Inc. Tier Two Executive Severance Plan, dated
January 1, 2024 (filed as Exhibit 10.26 to the
Company's Annual Report on Form 10-K, filed February
21, 2024, and incorporated herein by reference).
*
10.2 Transition Agreement between ANSYS, Inc. and
Nicole Anasenes, dated February 15, 2024
(filed as Exhibit 10.27 to the
Company's Annual Report on Form 10-K,
filed February 21, 2024, and incorporated herein by reference)
.
*
31.1 Certification of Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS Inline XBRL Instance Document (the instance
document does not appear in the Interactive
Data File because its XBRL tags are
embedded within the Inline XBRL document)
101.SCH Inline XBRL Taxonomy Extension Schema
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB Inline XBRL Taxonomy Extension Label Linkbase
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase
104 Cover Page Interactive Data File (formatted
as Inline XBRL and contained in Exhibit 101)
*Indicates management contract or compensatory plan, contract or arrangement.
42
-------------------------------------------------------------------------------
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ANSYS, Inc.
Date: May 1, 2024 By: /s/
Ajei S. Gopal
Ajei S. Gopal
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 1, 2024 By: /s/
Rachel Pyles
Rachel Pyles
Chief Financial Officer and Senior Vice President of Finance
(Principal Financial Officer)
43
EXHIBIT 31.1
CHIEF EXECUTIVE OFFICER CERTIFICATION
I, Ajei S. Gopal, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of ANSYS, Inc. ("Ansys");
2.
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of Ansys as of,
and for, the periods presented in this report;
4.
Ansys' other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Ansys and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to Ansys, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of Ansys' disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d.
Disclosed in this report any change in Ansys' internal control over financial
reporting that occurred during Ansys' most recent fiscal quarter (Ansys'
fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, Ansys' internal
control over financial reporting; and
5.
Ansys' other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to Ansys' auditors
and the audit committee of Ansys' board of directors (or persons performing
the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect Ansys' ability to record, process, summarize and
report financial information; and
b.
Any fraud, whether or not material, that involves management or other
employees who have a significant role in Ansys' internal control over
financial reporting.
Date: May 1, 2024 /s/ Ajei S. Gopal
Ajei S. Gopal
President and Chief Executive Officer
(Principal Executive Officer)
EXHIBIT 31.2
CHIEF FINANCIAL OFFICER CERTIFICATION
I, Rachel Pyles, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of ANSYS, Inc. ("Ansys");
2.
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of Ansys as of,
and for, the periods presented in this report;
4.
Ansys' other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Ansys and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to Ansys, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of Ansys' disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d.
Disclosed in this report any change in Ansys' internal control over financial
reporting that occurred during Ansys' most recent fiscal quarter (Ansys'
fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, Ansys' internal
control over financial reporting; and
5.
Ansys' other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to Ansys' auditors
and the audit committee of Ansys' board of directors (or persons performing
the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect Ansys' ability to record, process, summarize and
report financial information; and
b.
Any fraud, whether or not material, that involves management or other
employees who have a significant role in Ansys' internal control over
financial reporting.
Date: May 1, 2024 /s/ Rachel Pyles
Rachel Pyles
Chief Financial Officer and Senior Vice President of Finance
(Principal Financial Officer)
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of ANSYS, Inc. (the "Company") on Form
10-Q for the quarter ended March 31, 2024 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Ajei S. Gopal,
President and Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that to my knowledge:
(1)
The Report fully complies with requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended, and
(2)
The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
This certification is provided solely pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall
not be deemed to be part of the Report or filed for any purpose whatsoever.
/s/
Ajei S. Gopal
Ajei S. Gopal
President and Chief Executive Officer
(Principal Executive Officer)
May 1, 2024
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of ANSYS, Inc. (the "Company") on Form
10-Q for the quarter ended March 31, 2024 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Rachel Pyles, Chief
Financial Officer and Senior Vice President of Finance of the Company,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1)
The Report fully complies with requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended, and
(2)
The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
This certification is provided solely pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall
not be deemed to be part of the Report or filed for any purpose whatsoever.
/s/
Rachel Pyles
Rachel Pyles
Chief Financial Officer and Senior Vice President of Finance
(Principal Financial Officer)
May 1, 2024
{graphic omitted}
{graphic omitted}